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Week Ahead - GDP
The week ahead highlights the critical reporting of second quarter gross domestic product (GDP). While we have seen indications of economic stabilization and recovery in Leading Indicators and other key metrics, GDP will have its first chance to confirm the news that has helped to lift the market so high
so fast. Of course, by "high," we mean better than six feet under.Monday
Following up last week's Existing Home Sales surge, New Home Sales are due for report this Monday at 10:00 a.m. Economists surveyed by Bloomberg forecast the annual pace of New Home Sales will rise just slightly to 350K, from the 342K recorded for May.
We do not expect to see the same kind of lift in New Home Sales, as seen in the 3.6% jump for Existing properties. Much of the sales of previously owned homes has come from foreclosure and distressed property absorption. The National Association of Realtors reported that distressed properties composed about one-third of the used home sales recorded for June, though down from one-half this past spring. Interest rates inched up slightly, but consumer sentiment is improved from earlier in the year, so we can attribute some of the gain to distressed property absorption now that the economy appears to be stabilizing.
Home Builder sentiment is still down in the dumps, and the builders are not going to be too enthusiastic about putting up new properties until existing inventory eases even further. The inventory of homes for sale stood at 9.4 months, down from 9.8 months in May. This should help to stop the bleeding in pricing and further aid sentiment for home purchase.
The Securities and Exchange Commission is scheduled to meet with its investor-advisory committee. An early sign of relieved liquidity, two initial public offerings are planned for the week ahead. Look for the launch in trading of shares of Sutherland Asset Management ($15 IPO price) and PennyMac Mortgage Investment Trust ($20).
The board of the Chrysler Group is scheduled to meet on Monday. The day's earnings schedule highlights reports from Alberto Culver (NYSE: ACV), Amgen (Nasdaq: AMGN), Buffalo Wild Wings (Nasdaq: BWLD), Cal-Maine Foods (Nasdaq: CALM), Corning (NYSE: GLW), Danaos (NYSE: DAC), Fidelity National Financial (NYSE: FNF), Health Management Associates (NYSE: HMA), HealthStream (Nasdaq: HSTM), Honeywell (NYSE: HON), Manitowoc (NYSE: MTW), PrePaid Legal (NYSE: PPD), RadioShack (NYSE: RSH), Rent-A-Center (Nasdaq: RAII), SOHU.com (Nasdaq: SOHU), Tellabs (Nasdaq: TLAB), Torchmark (NYSE: TMK), Travelzoo (Nasdaq: TZOO), Verizon (NYSE: VZ) and many others.Tuesday
We will receive the latest read on home pricing Tuesday morning around 9:00 a.m. S&P Case Shiller provides its Home Price Index for the lagged month of May at that time, so we will not get a fresh read. Over the last two reported periods, the annual price drop has moderated, but still read down 18% and 18.1%, respectively for the 10-City and 20-City Composites. We expect the "less bad" trend will continue through June, and the market rally will thus be reinforced. It's worth noting that 13 of 20 metropolitan regions saw improved
rates of price decline
On Friday, the Reuters/University of Michigan Consumer Sentiment reading stabilized after a mid-July drop. On Tuesday at 10:00 AM, the Conference Board reports on its Consumer Confidence Index. This reading also saw a steep decline last month, dropping 5.5 points. Economists forecast confidence will improve to 50.0 in this latest reading, up from 49.3 last month.
A second sentiment measure, the State Street Investor Confidence Index is also due at 10:00. State Street (NYSE: STT), measures real portfolio risk based on the holdings of investors at a given time. As the economy shows signs of life and stocks rise, momentum builds as the herd also runs. As a result, risk taking is increasing and equity purchases rising. However, much has been said about the light volume behind this nascent summer rally. The State Street measure increased to 115.5 in June.
The International Council of Shopping Centers Weekly Same-Store Sales data is due in the pre-market as always. Last week's tally showed sales rose 0.5% week-to-week, but fell 0.3% year-to-year.
The Senate Judiciary Committee will vote on the nomination of Sonia Sotomayor to the Supreme Court. The House Financial Services Committee will examine executive compensation. San Francisco Fed President Janet Yellen is scheduled to address a group around 10:00 a.m. A high ranking Chinese administration representative, Vice Premier Quishan, will meet with US business men.
The FDA will examine King Pharmaceuticals' new cardiovascular drug. The earnings schedule includes reports from AGCO (Nasdaq: AGCO), AMCORE Financial (Nasdaq: AMFI), Arthur J. Gallagher (NYSE: AJG), BP plc (NYSE: BP), Calamos Asset Management (Nasdaq: CLMS), Celanese (NYSE: CE), Ceradyne (Nasdaq: CRDN), Check Point Software (Nasdaq: CHKP), Coach (NYSE: COH), Coventry Health (NYSE: CVH), Deutsche Bank (NYSE: DB), Energizer (NYSE: ENR), Jacobs Engineering (NYSE: JEC), Massey Energy (NYSE: MEE), National Oilwell Varco (NYSE: NOV), Norfolk Southern (NYSE: NSC), Panera Bread (Nasdaq: PNRA), Potlatch (NYSE: PCH), Psychiatric Solutions (Nasdaq: PSYS), Rockwell Automation (NYSE: ROK), Smith Int'l (NYSE: SII), Teva Pharmaceuticals (Nasdaq: TEVA), Valero Energy (NYSE: VLO), Viacom (NYSE: VIA), Waters Corp. (NYSE: WAT), Western Digital (NYSE: WDC) and others.Wednesday
Durable Goods Orders are due first thing in the morning at 8:30. While orders have improved sequentially from time to time of late, they remain sharply below prior year levels. That said, much like your president, the market looks for change. In May, Durable Goods improved 1.8% over April's depressed level (April Orders fell 1.4%). For June, economists surveyed by Bloomberg anticipate orders will moderate some 0.5%. We suspect some of the spring improvement came as a result of pent up demand given the panic-level ordering patterns that existed through the turn of the year and into March.
The regular Mortgage Bankers reporting of weekly mortgage applications is due in the pre-market. Last week's data showed summer taking a toll on activity, not to mention a significant uptick in fixed mortgage rates. The Market Composite Index improved 2.8% on a seasonally adjusted basis, driven by a Purchase Index gain of 1.3% and Refinance move of 4.0%. Fixed 30-year mortgages were contracted at an average rate of 5.31% during the week, up from 5.05% the week before.
The Senate Banking Committee will turn its focus on shareholder protection and corporate governance on Wednesday. A U.S. bankruptcy court will deliberate on the reorganization or sale of auto parts supplier Delphi.
New York Fed President Bill Dudley will discuss factors driving US growth and also the topic of inflation at a morning meeting of a NY group. The Federal Reserve releases its Beige Book of regional economic indicators in the afternoon, at 2:00 p.m.
The EIA releases its Petroleum Status Report at 10:30. Last week's data showed US crude oil inventory decreased by 1.8 million barrels in the week ending July 17, while gasoline stores increased by 0.8 million barrels. Both inventory levels stood above normal for this time of year and therefore offer little support to volatile pricing. However, the jolly sentiment around earnings season has put its arms around the commodity, lifting futures back up towards the $70 mark.
The day's earnings slate includes news from Advance America Cash America (NYSE: AEA), Aflac (NYSE: AFL), Agnico-Eagle Mines (NYSE: AEM), Akamai (Nasdaq: AKAM), Akzo Nobel (Nasdaq: AKZOF.PK), Amkor (Nasdaq: AMKR), ArcelorMittal (NYSE: MT), Arctic Cat (Nasdaq: ACAT), ASM Int'l (Nasdaq: ASMI), Banco Santander (NYSE: STD), BOK Financial (Nasdaq: BOKF), BorgWarner (NYSE: BWA), Brookfield Homes (NYSE: BHS), Cadence Designs (Nasdaq: CDNS), Cal Dive Int'l (NYSE: DVR), Callaway Golf (NYSE: ELY), Cerner Corp. (Nasdaq: CERN), Coca-Cola (NYSE: CCE), ConocoPhillips (NYSE: COP), Covance (NYSE: CVD), Daimler (NYSE: DAI), Delphi Fin'l (NYSE: DFG), Digital River (Nasdaq: DRIV), Electronics for Imaging (Nasdaq: EFII), Express Scripts (Nasdaq: ESRX), FBR Capital Markets (Nasdaq: FBCM), Fiserv (Nasdaq: FISV), Genco Shipping (NYSE: GNK), General Dynamics (NYSE: GD), General Maritime (NYSE: GMR), GSI Commerce (Nasdaq: GSIC), Goldcorp (NYSE: GG), Hecla Mining (NYSE: HL), Honda Motor (NYSE: HMC), Hospira (NYSE: HSP), Internet Brands (Nasdaq: INET), Jones Apparel (NYSE: JNY), Kaiser Aluminum (Nasdaq: KALU), Kulicke & Soffa (Nasdaq: KLIC), Lam Research (Nasdaq: LRCX), Martha Stewart (NYSE: MSO), MeadWestVaco (NYSE: MWV), Medco Health (NYSE: MHS), Moody's (NYSE: MCO), Nissan Motor (Nasdaq: NSANY), Nomura Holdings (Nasdaq: NRSCF.PK), Oceaneering Int'l (NYSE: OII), Penn National Gaming (Nasdaq: PENN), Praxair (NYSE: PX), Qwest Communications (NYSE: Q), Royal Caribbean (NYSE: RCL), Ryland Group (NYSE: RYL), Sanofi-Aventis (NYSE: SNY), SAP AG (NYSE: SAP), Sealed Air (NYSE: SEE), Southern Co. (NYSE: SO), Sturm Ruger (NYSE: RGR), Symantec (Nasdaq: SYMC), Teradyne (NYSE: TER), Time Warner (NYSE: TWX), Visa (NYSE: V), WellPoint (NYSE: WLP), World Acceptance (Nasdaq: WRLD) and many more.Thursday
Weekly Jobless Claims sit alone on Thursday, with nary an economic report to be found. In uncharacteristic fashion, forecasters have strayed from the prior week's tally to go out on a limb with a consensus view for 585K new benefits filers in the measured period. That would mark another sharp jump from the prior week tally, which measured 554K. Recall, last week's total signified a 30K jump from a sweet
count the week before that.
The EIA reports on Natural Gas inventory at 10:30. Last week's data showed Nat Gas levels increased by 66 Bcf in the week ended July 17. The FDA will review Schering-Plough's (NYSE: SGP) application for schizophrenia drug Saphris and decide on a Bristol-Myers Squibb/Astranzeneca (NYSE: BMY, AZN) diabetes treatment. The Fed reports on its balance sheet at 4:30 p.m.
The earnings schedule includes news from Akeena Solar (Nasdaq: AKNS), Alcatel-Lucent (NYSE: ALU), AmeriSourceBergen (NYSE: ABC), Apache (NYSE: APA), Arch Chemicals (NYSE: ARJ), Asset Acceptance (Nasdaq: AACC), AstraZeneca (NYSE: AZN), Automatic Data Processing (NYSE: ADP), Avery Dennison (NYSE: AVY), Barrick Gold (NYSE: ABX), Beckman Coulter (NYSE: BEC), Becton, Dickinson & Co. (NYSE: BDX), BioScrip (Nasdaq: BIOS), Cablevision (NYSE: CVC), CARBO Ceramics (NYSE: CRR), CIGNA (NYSE: CI), Colgate-Palmolive (NYSE: CL), Dresser-Rand (NYSE: DRC), drugstore.com (Nasdaq: DSCM), Eastman Kodak (NYSE: EK), Evergreen Solar (Nasdaq: ESLR), Expedia (Nasdaq: EXPE), ExxonMobil (NYSE: XOM), First Solar (Nasdaq: FSLR), Gentiva Health (Nasdaq: GTIV), Goodyear Tire & Rubber (NYSE: GT), International Paper (NYSE: IP), Internet Capital Group (Nasdaq: ICGE), Iron Mountain (NYSE: IRM), Kellogg (NYSE: K), Kennametal (NYSE: KMT), MasterCard (NYSE: MA), McAfee (NYSE: MFE), MetLife (NYSE: MET), Monster Worldwide (NYSE: MWW), Mylan (NYSE: MYL), Newell Rubbermaid (NYSE: NWL), Noble Energy (NYSE: NBL), NTT DoCoMo (NYSE: DCM), NYSE Euronext (NYSE: NYX), Parker Hannifin (NYSE: PH), PerkinElmer (NYSE: PKI), Regal Entertainment (NYSE: RGC), Rockwell Collins (NYSE: COL), Sony (NYSE: SNE), Dow Chemical (NYSE: DOW), Travelers (NYSE: TRV), Tyco Int'l (NYSE: TYC), Walt Disney (NYSE: DIS) and many more.Friday
The all important GDP report is on tap for the last day of July. This initial reporting on the second quarter economy is expected to show moderation of contraction after the prior two quarters of demise. Bloomberg's survey of economists indicates expectations for a 0.7% contraction in Q2. That's not good news on an absolute basis, but when comparing to the prior two quarters' contraction in the mid-single digits, it's at least better news. We expect the market will be sensitive to variation from consensus on this data point, so note the news versus expectations in your pre-market evaluation.
Employment Costs are released with the GDP data, and economists are looking for a 0.3% increase, which is low. The federal minimum wage was hiked in July though, so Q3 should offer a more significant increase.
The tally of Midwestern manufacturing activity, the Chicago Purchasing Managers Index, is due at 9:45 a.m. Friday. Given the revival of the auto sector, and we use that word loosely, economists are expecting an improvement in this metric to 44.0 for July, versus the 39.9 take in June. Remember, when the index is short of 50.0, it signifies economic contraction.
Farm Prices will be reported at 3:00 p.m., but most of you will miss it as you plan your weekend. The changes in pricing are greatly dependent on allocated acreage per crop and the development of those crops (weather, etc.), but also on the general local and global economic demand for foods and the use of foods in energy development.
The earnings slate includes Allergan (NYSE: AGN), Anglo American (Nasdaq: AAUK), AngloGold Ashanti (NYSE: AU), Apartment Investment Management (NYSE: AIV), Autonation (NYSE: AN), Calpine (NYSE: CPN), Chevron (NYSE: CVX), CNA Surety (NYSE: SUR), Constellation Energy (NYSE: CEG), Dominion Resources (NYSE: D), DryShips (Nasdaq: DRYS), FUJIFILM Holdings (Nasdaq: FUJI), Harte-Hanks (NYSE: HHS), ITT Corp. (NYSE: ITT), Johnson Outdoors (Nasdaq: JOUT), Kaydon (NYSE: KDN), Magellan Health (Nasdaq: MGLN), Makita (Nasdaq: MKTAY), Mitsubishi UFJ Financial (NYSE: MTU), Nicor (NYSE: GAS), PNM Resources (NYSE: PNM), PSE&G (NYSE: PEG), Sempra Energy (NYSE: SRE), Snap-on Inc. (NYSE: SNA), The Washington Post (NYSE: WPO), Total (NYSE: TOT), Weyerhaeuser (NYSE: WY) and several others.Please see our disclosures at the Wall Street Greek website and author bio pages found there.