Week Ahead: Fresh Look at Retail & Employment
The Latest Retail and Jobs Data
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Despite the Dubai debacle, this week will take its lead from retail Chain Store Sales, due out on Thursday, and Employment figures, scheduled for Friday release. These key economic barometers should offer investors reason to buy or sell for some time to come.
The surviving Thanksgiving Day turkeys are returning to Capitol Hill to debate health care reform beginning on Monday. With at least a full week's preparation, the cackling Congressmen should be loud from the start.
The day's only economic report is due for publishing at 9:45 AM Monday morning. Economists forecast November's Chicago Purchasing Managers Index will have deteriorated to 53.0 (53.3 based on Barron's), from 54.2 in October. Manufacturing activity was reported deteriorated in the New York region two weeks ago, according to the 11 point lower Empire State Manufacturing Index. However, Philadelphia area activity improved in November.
At 3:00 PM, the Department of Agriculture will report on Farm Prices. This report for November provides a nice read into food prices, and perhaps the renewed advent of inflation in the future.
Monday's EPS report schedule includes data from Compania Cervecerias Unidas S.A. (NYSE: CCU), Alloy (Nasdaq: ALOY), Golar LNG Ltd. (Nasdaq: GLNG), Inergy Holdings (Nasdaq: NRGP), Knightsbridge (Nasdaq: VLCCF), Linktone (Nasdaq: LTON), Omnivision Technologies (Nasdaq: OVTI), Telvent (Nasdaq: TLVT), Unify Corp. (Nasdaq: UNFY) and more.
The President will announce his plans for Afghanistan on Tuesday. President Obama will address the nation on prime time television, and is expected to announce a significant troop increase.
Weekly same-store sales will be reported Tuesday morning for the week ended November 28, which is inclusive of Black Friday. Sales will, therefore, be sharply above the prior week count. Last year, Black Friday fell on November 28, so the year-to-year comparison should be relevant as well. What's not relevant, therefore, is the comparison to the prior week result. At last check, sales were flat on a weekly basis, but jumped 3.3% when compared to the prior year total. Look for monthly Chain Store Sales results Thursday.
ISM's Manufacturing Index is expected to show only slight deterioration for November, to 55.0, from 55.7 in October. Clearly, Monday's data from Chicago might alter expectations a bit, depending on whether it concurs with data from New York or Philly for the same month. The New Orders Index backed off a bit last month, giving cause for concern here. Also, October's results represented a nice jump up from September. Remember, a reading above 50.0 signifies economic expansion.
Construction Spending is scheduled for report at 10:00 AM. This latest reading for the month of October is seen falling 0.4% from September's take, based on Bloomberg's survey of economists. September Spending increased 0.8%, and this segment of real estate activity may have also benefited from the First-Time Homebuyer Tax Credit. Also, while September's spending increased, August was revised nearly equally lower (revised to 0.1% growth from 0.8%).
The National Association of Realtors is scheduled to report on Pending Home Sales at 10:00 AM Tuesday. The Pending Home Sales Index increased for the eighth consecutive month in September. This was most certainly driven by the rush to get the benefit from the First-Time Homebuyer Tax Credit, as early October marked the effective deadline to enter into contract for early December closing (prior to extension). The index rose 6.1%, to 110.1 in September, standing 21.2% higher than September 2008. We expect an October/November decline in this data.
Motor Vehicle Sales will be reported by individual carmakers Tuesday. In aggregate, Motor Vehicle Sales are expected to slip to an annualized pace of 7.75 million, down from 7.9 million in October. Cash for Clunkers and a resulting letdown in October should stabilize toward some sort of normal run rate reported for November here. Sales of domestic and imported vehicles rose to a 10.5 million rate in October, from 9.2 million in September.
Philadelphia Federal Reserve President Charles Plosser is scheduled to give a lunchtime speech on the economic outlook to a seminar in Rochester. The Reserve Bank of Australia is due to make a decision on its key rate.
General Motors' board meets to discuss and debate what to do with its Saab unit. A deal to sell the segment to a Scandinavian company fell apart last week. Tuesday's earnings slate includes data from China Nepstar Chain Drugstore (NYSE: NPD), Universal Technical Institute (NYSE: UTI), Beacon Roofing Supply (Nasdaq: BECN), Staples Inc. (Nasdaq: SPLS) and more.
Wednesday starts the monthly employment report parade. The first of the data will come from Challenger Gray & Christmas, as the group reports on planned corporate Job-Cuts at 7:30 AM. Last month's data showed announced layoffs fell to 55,679, down from 66,404 in September. October's layoffs represented the lowest monthly figure since March of 2008. We opined recently that once panic set in, corporations likely fired more employees than the environment called for. Thus, as economic growth emerges, significant need for rehiring should ensue.
ADP's Private Employment Report is due for release at 8:15 AM on Wednesday as well. Net monthly labor market attrition has eased in recent months, both within the private marketplace and the overall market, which will be reported by the Federal government Friday. Still, jobs are being lost on net, and unemployment has kept on the rise, reaching 10.2% in October.
ADP's report showed the private labor market shed 203,000 jobs in October, improved from September's revised loss of 227K. Economists do not generally publish their forecast for this component of the labor market separately, but investors will still pay attention to the report on Wednesday morning for signs of what's to come Friday.
The Weekly Applications Survey, produced by the Mortgage Bankers Association, has garnered our attention in recent weeks. We've well documented the impact of the First-Time Homebuyer Tax Credit on real estate, as seen through mortgage application volume. However, last week's data showed a change in trend. For the first time in roughly two months, the Purchase Index, which measures applications on home purchases, rose. It increased 9.6% over the prior week measure. The Market Composite Index, however, deteriorated by 4.5%, as the Refinance Index fell 9.5%. Mortgage rates held relatively steady at 4.82% (from 4.83%) and 4.32% on average for contracted 30-year and 15-year fixed rate mortgages, respectively. This change in trend could prove important in defining how long and deep this latest real estate test runs.
Platts will hold its Global Energy Outlook forum Wednesday in New York. Look for the regular Petroleum Status Report at 10:30. Last week's inventory data showed commercial crude oil stocks increased by 1.0 million barrels in the week ended November 20. Total Motor Gasoline inventory also increased by the same amount, while Distillate Fuel Inventories decreased by 0.5 million barrels.
Treasury Secretary Tim Geithner testifies before the Senate Agriculture Committee for the sake of aiding Congress' understanding surrounding a new bill on over-the-counter derivatives. The Fed releases its Beige Book of regional economic indicators at 2:00 p.m. This data is integral in the development and maintenance of Fed policy.
Walgreens (NYSE: WAG) and Hot Topic (Nasdaq: HOTT) are due to report November sales a day ahead of most retailers. Bristol-Myers Squibb (NYSE: BMY) holds its shareholders meeting. The day's earnings schedule includes reports from Aeropostale (NYSE: ARO), Collective Brands (NYSE: PSS), Jo-Ann Stores (NYSE: JAS), Casella Waste Systems (Nasdaq: CWST), Charming Shoppes (Nasdaq: CHRS), SeaChange Int'l (Nasdaq: SEAC), Shanda Interactive Entertainment (Nasdaq: SNDA), Synopsys (Nasdaq: SNPS), Synovis Life Technologies (Nasdaq: SYNO), The Descartes Systems Group (Nasdaq: DSGX), The Pantry (Nasdaq: PTRY) and more.
The pace of trading is likely to be dictated by retailers' Chain Store Sales announcements for November and the critical Black Friday, which has already been reported up about 0.5% from 2008's horrible result. Thomson Reuters data indicates chain store sales might have risen 2.5% in November.
President Obama will hold a jobs forum with leaders of the business, labor, finance and nonprofit markets. Meanwhile, standing Chairman of the Federal Reserve Bernanke begins his confirmation process for another term with a hearing before the Senate Banking Committee. The Fed reports on its balance sheet today at 4:30 p.m. The ECB is expected to close out its crisis-support measures, though announce it will hold rates steady at its policy meeting that ends today.
The employment data parade continues with the early morning reporting of the Monster Employment Index, compiled by Monster WorldWide (NYSE: MWW). The MEI highlights demand for jobs online, and last month's report showed very slight index improvement to 120, from a level of 119 in September.
Weekly Jobless Claims are due for report at their usual 8:30 a.m. We received good news on this front last week, when the count of new benefits filers fell deep under 500K. The reading at 466K was much improved from the prior week's tally of 501K. The four-week moving average also fell to below that psychological threshold, to 496,500. Economists forecast a reading of 485K for this week.
Look for the third quarter Productivity and Costs Report at 8:30 as well. Economists expect unfavorable revision to both data points. Productivity is seen reduced to an 8.6% gain for the quarter, thanks still to improving demand and slim workforce. Unit Labor Costs are expected to be trimmed by 4.2%, instead of the initially reported -5.2% change.
The Institute for Supply Management will report its Nonmanufacturing Index at 10:00 a.m. The service sector is catching up to manufacturing, as the index is seen rising to 52.0 for November, up from 50.6 in October. This looks like a nonstarter for Thursday, as real change is not yet showing.
The EIA reports on Natural Gas Inventory at 10:30. Last week's report showed natural gas stocks increased just 2 Bcf. Natural gas stores are still well above last year's level and the five year average for this time of year. It is not the current supply/demand equation that is moving price in energy commodities, but dollar weakness, concern regarding Chinese stocking, and a reviving global economy.
Thursday's earnings slate includes news from Canadian Imperial Bank of Commerce (NYSE: CM), Structured Products (NYSE: KOS), Del Monte Foods (NYSE: DLM), Quanex Building Products (NYSE: NX), Siemens AG (NYSE: SI), Toll Brothers (NYSE: TOL), Toronto Dominion (NYSE: TD), A-Power Energy (Nasdaq: APWR), Argon ST (Nasdaq: STST), Cost Plus (Nasdaq: CPWM), Diamond Foods (Nasdaq: DMND), Kewaunee Scientific (Nasdaq: KEQU), Liquidity Services (Nasdaq: LQDT), Magma Design Automation (Nasdaq: LAVA), Marvell Technology (Nasdaq: MRVL), Mentor Graphics (Nasdaq: MENT), Novell Inc (Nasdaq: NOVL), Smith & Wesson (Nasdaq: SWHC), UTI Worldwide (Nasdaq: UTIW), XETA Technologies (Nasdaq: XETA) and more.
The Labor Department produces its monthly Employment Situation Report Friday morning at 8:30. The unemployment rate is expected to hold steady at 10.2%, based on economists surveyed. Nonfarm payrolls are seen dropping by 100K, after falling 190K in October. The average workweek is expected to have increased slightly to 33.1 hours, and average hourly earnings should have increased by 0.2% (0.3% in Oct.), based on economists surveyed.
Look for October Factory Orders at 10:00 a.m. Orders are expected to have risen by 0.2% in October, after improving by 0.9% in September. Durable Goods Orders posted recent decline, but strength in chemicals pricing may help keep overall order dollar volume up in October.
Former Fed Chairman Volcker is scheduled to report to President Obama on tax reform options on this day. Philly Fed President Plosser discusses the crisis at a morning meeting in Philadelphia. St. Louis Fed President Bullard will address the same meeting at 1:15 p.m.
The day's EPS schedule includes news from Big Lots (NYSE: BIG), Royal Bank of Canada (NYSE: RY) and Sirona Dental Systems (Nasdaq: SIRO).
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