This Week: Potential EPS Catalyst for Market Rise

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This Week

This week offers an All-Star Break and breaking EPS news from corporate leaders General Electric, Goldman Sachs, Intel, Bank of America and Google. With S&P 500 companies still losing earnings ground against last year's comparable results, there's speculation that Goldman might have uplifting news the whole market might enjoy. If analyst Meredeth Whitney has it right, Goldman's report might be the catalyst this market has been lacking in recent weeks.

Monday

Supreme Court Justice nominee Sonia Sotomayor faces Congressional hearings as part of the regular process toward her confirmation. Unless an opposing party is holding some unknown fact that might undermine her confirmation, it looks like she will be confirmed.

A June Treasury budget deficit of $94.3 billion piled on to a mounting net spending count. With three months to go in fiscal year 2009, the deficit stands at $1.086 trillion. Calls for new stimulus were quietly put to rest last week, as the government seems to have reached a point where it is cautiously mindful of new ideas for spending. Signs of economic life (not growth mind you) have allowed the feds a chance to breath after months of fire fighting.

Treasury Secretary Geithner met with his counterparts in the UK on Monday. He'll be in Saudi Arabia by Tuesday, and Abu Dhabi by Wednesday.

The US government pushes in court to force Swiss bank UBS (NYSE: UBS) to reveal the names of Americans behind secretive accounts held there. The earnings schedule highlights reports from Bank of the Ozarks (Nasdaq: OZRK), CSX Corp. (NYSE: CSX), Fastenal (Nasdaq: FAST), Magal Security Systems (Nasdaq: MAGS), Merix (Nasdaq: MERX), Novellus Systems (Nasdaq: NVLS), POSCO (NYSE: PKX) and Wegener (Nasdaq: WGNR).

Tuesday

Goldman Sachs' (NYSE: GS) EPS report has the ability to rejuvenate a tired market on Tuesday. Goldman reports in the pre-market. Meredith Whitney upgraded the stock on Monday, noting expectations for quarterly earnings of $4.65, well above the analysts' consensus of $3.48, as reported by Thomson Reuters. Ms. Whitney, just launching her own firm, set her target at $186. Goldman's shares jumped 5% on the day, to $149.

Four economic reports reach the wire on Tuesday, three of which we will discuss here. Retail Sales are due for their monthly report Tuesday morning at 8:30. Sales activity in June was dampened by greater than average rainfall in the heavily populated Northeast, West and portions of the Southwest US. Even so, higher oil and gasoline prices are expected to drive a rise in retail sales for the second consecutive month. Gasoline stations (+3.6%) contributed greatly to May's 0.5% increase, and economists see the same driver pushing sales growth of 0.5% in June. Excluding autos, sales are seen increasing 0.6%.

Economists surveyed by Bloomberg forecast Producer Prices likely increased 0.8% in June, driven by an energy price boost. PPI rose 0.2% in May. Excluding food and energy, the Core PPI is expected to post a 0.1% increase, contrasting against the 0.1% decline posted in May.

Last week's ICSC Weekly Same-Store Sales data showed an increase of 0.1% week-to-week and a 0.5% year-over-year rise. Wal-Mart's (NYSE: WMT) withdrawal from posting interim monthly results has skewed retail sales data to the downside. Throughout this recession, Wal-Mart has progressed, taking market share from trade-down shoppers.

Business Inventories are due up at 10:00 a.m. Drops in Wholesale and Manufacturers' inventories have led economists to forecast a similar decline in business level stocks. Economists surveyed by Bloomberg see a -0.8% decline this time around, compared to the 1.1% drop in April. Sales fell at a lesser rate in April, leading to improvement in the inventory-to-sales ratio to a still relatively high 1.43.

SEC Chair Mary Schapiro has a scheduled date with the House Financial Services Committee, and a Senate grouping considers a new consumer financial protection agency. Tuesday brings earnings news from Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), St. Jude Medical () and Yum! Brands (NYSE: YUM). Also look for news from AAR Corp. (NYSE: AIR), Altera (Nasdaq: ALTR), AMREP Corp. (NYSE: AXR), Goldman Sachs (NYSE: GS), HDFC Bank (NYSE: HDB), Hi-Tech Pharmacal (Nasdaq: HITK), Life Partners Holdings (Nasdaq: LPHI), Ocean Power Technologies (Nasdaq: OPTT), Palm Harbor Homes (Nasdaq: PHHM), Peregrine Pharmaceuticals (Nasdaq: PPHM), RF Monolithics (Nasdaq: RFMI) and others.

Wednesday

The Consumer Price Index (CPI) is due for report at 8:30 on Wednesday morning. As with the PPI, higher gasoline prices are seen driving Headline CPI up 0.7% in June, compared to the modest 0.1% increase posted in May. Core CPI, excluding food and energy prices, should exhibit more moderation, rising 0.1%, according to Bloomberg's survey of economists. That matches up against May's 0.1% increase.

The Empire State Manufacturing Survey is also due at 8:30. The take on New York area manufacturing backed up from an improving trend (less contraction) in June, and not much change is seen for July, given leading indicator data within the survey. Economists are looking for a reading of -4.5 this month, versus -9.4 in June.

Industrial Production is due at 9:15 AM ET, and is seen posting one of those "less bad" results the market is tired of. Economists see contraction of 0.7% in June, compared against the 1.1% decline recorded in May. Manufacturing capacity is expected to slip further to a new record low of 67.8%, from 68.3% in May. Any ideas what to do with all the empty plants?

Last week's mortgage application data got a weather aided boost, in our opinion. After day in and day out of rain here in the busy Northeast, the sun broke through. Recall, the prior week's data dropped off significantly, and it is seasonally adjusted so the holiday should have played no role. Last week noted recovery, as the Market Composite Index jumped 10.9%, on a 15.2% Refinance Index push and 6.7% Purchase Index rise. Rates on contracted 30-year mortgages stuck at 5.34%.

The EIA Petroleum Status Report is up at 10:30. Last week's data showed crude oil stocks saw a draw of 2.9 million barrels, while gasoline stocks built by 1.9 million.

The Federal Reserve releases the meeting minutes from its last get-together at 2:00 PM. The Bank of Japan, under political pressure and economic strain will likely extend corporate financing aids, given its lack of room to help with rates. The SEC is hearing testimony on broker dealer underwritings of municipal securities. The Senate Banking Committee interrogates folks on hedge-fund regulation, while the House Financial Services group discusses the Administration's financial regulation reform plan.

Earnings season heats up on Wednesday, with reports due from Abbott Laboratories (NYSE: ABT), Acergy (Nasdaq: ACGY), ADTRAN (Nasdaq: ADTN), Alliance Financial (Nasdaq: ALNC), AMR Corp. (NYSE: AMR), ASML Holdings (Nasdaq: ASML), China-Biotics (Nasdaq: CHBT), Cintas (Nasdaq: CTAS), Crown Holdings (NYSE: CCK), Fortune Industries (AMEX: FFI), Gannett (NYSE: GCI), Joe's Jeans (Nasdaq: JOEZ), Kinder Morgan Management (NYSE: KMR), Landstar System (Nasdaq: LSTR), Lufkin Industries (Nasdaq: LUFK), MEDTOX Scientific (Nasdaq: MTOX), Polycom (Nasdaq: PLCM), Resources Global Professionals (Nasdaq: RECN), Rurban Financial (Nasdaq: RBNF), Schawk (NYSE: SGK), Stanley Furniture (Nasdaq: STLY), Texas Industries (NYSE: TXI), United Community Fin'l (Nasdaq: UCFC), Universal Forest Products (Nasdaq: UFPI), W.W. Grainger (NYSE: GWW), Wolverine Worldwide (NYSE: WWW), Worthington Industries (NYSE: WOR) and Xilinx (Nasdaq: XLNX).

Thursday

Do NOT miss the testimony of former Treasury Secretary Hank Paulson on Thursday as he faces a grilling on the alleged strong-arming of Bank of America's Ken Lewis.

Weekly Initial Jobless Claims offered a breather at last check, dropping well below the 600K mark, to 565K. We'll be curious to see if moderation of job attrition continues here. Last week's drop was steep, recording 52K less layoffs than the week before. If a trend has begun, it will likely find welcome with traders.

The RBC Cash Index, a sentiment measure of household attitudes and spending, is due out at 9:00 AM. The barometer backtracked last month to 34.3, from 43 in May. If you tied me up, I would say to expect little change this time around, and that it will not matter to traders anyway.

Treasury International Capital is due at 9:00 a.m. as well. This report illustrates the flow of funds into and out of US investments. As it measures May this time around, we would look for foreign interest in rising American investments to have prevailed.

Following New York in economic reporting, though definitely not baseball, look for the Philly Fed Survey at 10:00. This latest take on Philadelphia area business activity (manufacturing) is seen backing off of its May improvement. The Philly Fed measure improved greatly to -2.2 in June, versus the -22.6 read in May. Economists anticipate something near -5.0 for July's reading. Note that each of these three readings indicate economic contraction, just at varying rates.

Working gas in storage increased by 75 Bcf at the last check of the EIA. Natural gas inventory regularly builds in summer, but a mild summer for much of the country allows for less air conditioner usage. Also, less factory capacity means less energy is used to run them. Thus, natural gas languishes, since it is still greatly a locally demanded resource. Oil prices shot up at a greater pace due to its global demand base and limited resource.

The Housing Market Index is due at 1:00 PM. This measure of home builder sentiment fell in June to 15, from 16 in May. Both are pathetic readings, versus healthy environment checks. The Fed publishes its Balance Sheet data at 4:00 PM.

Thursday's EPS schedule highlights news from Amphenol (NYSE: APH), AngioDynamics (Nasdaq: ANGO), AptarGroup (NYSE: ATR), Aracruz Celulose (NYSE: ARA), Associated Banc-Corp (Nasdaq: ASBC), Badger Meter (NYSE: BMI), Baxter Int'l (NYSE: BAX), Biogen Idec (Nasdaq: BIIB), Courier Corp. (Nasdaq: CRRC), Cubist Pharmaceuticals (Nasdaq: CBST), Cypress Semiconductor (NYSE: CY), Cytec Industries (NYSE: CYT), Datalink (Nasdaq: DTLK), East West Bancorp (Nasdaq: EWBC), Fidelity Southern (Nasdaq: LION), Genuine Parts (NYSE: GPC), Google (Nasdaq: GOOG), Harley-Davidson (NYSE: HOG), Home Bancshares (Nasdaq: HOMB), Insteel Industries (Nasdaq: IIIN), International Business Machines (NYSE: IBM), JP Morgan Chase (NYSE: JPM), Knoll Inc. (NYSE: KNL), Marriott Int'l (NYSE: MAR), MB Financial (Nasdaq: MBFI), McMoRan Exploration (NYSE: MMR), Meridian Biosciences (Nasdaq: VIVO), MGIC Investment (NYSE: MTG), Mission West Properties (Nasdaq: MSW), NEXEN (NYSE: NXY), Nokia (NYSE: NOK), Novartis (NYSE: NVS), People's United Financial (Nasdaq: PBCT), Polaris Industries (NYSE: PII), Popular (Nasdaq: BPOP), PPG Industries (NYSE: PPG), Provident Bancorp (Nasdaq: PBNY), Renaissance Learning (Nasdaq: RLRN), Simmons First National (Nasdaq: SFNC), Sonoco Products (NYSE: SON), Tempur Pedic Int'l (NYSE: TPX), Umpqua Holdings (Nasdaq: UMPQ) and several others.

Friday

Economists are not looking for significant improvement in June's Housing Starts data, despite the 17.2% jump in May. The forecast calls for the annual pace to ease to 530 million, from the 532 million pace seen in May.

The nation's governors will get together for their annual confab, and the talk of the town will undoubtedly be one Sarah Palin. Mexico's central bank is seen easing rates by a quarter point or more, as it deals with the general economic trouble we share, though compounded by drug wars and epidemic effects on its tourism base.

The week's EPS schedule concludes on news from some of our most important companies. Expect reports from Bank of America (NYSE: BAC), Citigroup (NYSE: C), General Electric (NYSE: GE), A.O. Smith (NYSE: AOS), Acme United (AMEX: ACU), BB&T Corp. (NYSE: BBT), First Horizon National (NYSE: FHN), Marshall & Ilsley (NYSE: MI), Mattel (NYSE: MAT), Meade Instruments (Nasdaq: MEAD), Prosperity Bancshares (Nasdaq: PRSP), Student Loan (NYSE: STU), Votorantim Celulose (NYSE: VCP) and Webster Financial (NYSE: WBS).

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