Spanish & Portuguese Strikes Threaten This Week

Week Ahead

Spanish & Portuguese strikes threaten Europe this week, just days after Hungary shook the world with its default warning. The Spanish Parliament will vote this week to cut the pay of government workers, and the streets are likely to fill with fiery protest. Austerity measures will be voted on in Portugal as well. Recall that it was a similar vote that led Greek citizens to march on their parliament. That was the day the market experienced its "flash crash," since blamed on fat fingers and computers run amok.

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Spanish & Portuguese Strikes Threaten This Week

Danger looms this week my friends, as the Spanish Parliament might pass legislation that incites protest, if not the fiery death of every politician within parliamentary halls that day (Tuesday). The same goes for Portugal on Wednesday. On Thursday, if not sooner, the ECB will produce its latest monetary policy, as will the Bank of England. Lucky for the Europeans, the World Cup kicks off on Friday. In fact, the beloved tournament might just offer the governments of Europe their best opportunity to screw over their citizens with purse pillaging legislation.

Monday

There are several interesting meetings scheduled for Monday, and boy would we like to be a fly on the wall at any of them. We invite any Wall Street Greek subscriber who might be attending, to comment via the tab below, filling us in on the happenings.

Meeting 1: The world's securities regulators are meeting at their annual conference. Let us know if the SEC and friends have any new bright ideas that might terrify markets a step further toward disintegration.

Meeting 2: Apple (Nasdaq: AAPL) is expected to launch its newest version of the iPhone at its development conference. While we expect the Apple groupies will be on top of this one if the popular press somehow fails to create news, please do fill us in on any fresh making-Apple-bigger than Microsoft (Nasdaq: MSFT) and the state of California kind of new product introductions.

Meeting 3: Halliburton (NYSE: HAL) is one of the many presenters at the RBC Capital Markets Oil Conference in New York City Monday (this is a must attend event this week). Halliburton is of course one of three implicated parties in the Deepwater Horizon Oil Spill catastrophe. It should be interesting to hear Halliburton field questions regarding its liability, and to watch the execs place the entirety of the blame on British Petroleum (NYSE: BP). Please please please update us if you happen to be at the meeting Monday or Tuesday - when Transocean presents.

Meeting 4: Federal Reserve Chairman Bernanke hits prime time television for a 7:45 PM "open interview" with Sam Donaldson that will include questions from the audience. We won't need you for this one thanks...

Meeting 5: North Korea's parliament is convening, with plenty hot topics on its agenda, like whether to launch on Tokyo and Seoul, and whether to increase the kidnappings of Japanese ladyboys for the Supreme Commander Emperor of the Universe Kim.

Meetings 6, 7 & 8: Medtronic (NYSE: MDT) is meeting with analysts Monday. Novartis (NYSE: NVS) and Amgen (Nasdaq: AMGN) are making presentations at a clinical oncology conference. This does not compare right? We're guessing everyone will attend the hotter parties, leaving this one for health care groupies alone.

There is one economic data point to look for Monday afternoon, when at 3 PM the Consumer Credit Report is released. After a huge contraction in credit in February (-$6.2 billion), it expanded by $2.0 billion in March. April's credit environment is expected to have expanded slightly, by $1.0 billion, based on the economists consensus forecast at Bloomberg (Barron's reports a +$2.0 billion expectation).

The IPO lockup periods expire for trading in Transatlantic Holdings (NYSE: TRH), Susquehanna Bancshares (Nasdaq: SUSQ) and GT Solar International (Nasdaq: SOLR). Express Scripts (Nasdaq: ESRX) shares are scheduled to split 2-for-1 Monday, and the earnings report schedule includes news from Altera (Nasdaq: ALTR), ATA Inc. (Nasdaq: ATAI), Cascade Corp. (Nasdaq: CASC), Casella Waste Systems (Nasdaq: CWST), FuelCell Energy (Nasdaq: FCEL) and G-III Apparel Group (Nasdaq: GIII).

Tuesday

Europe will be in the market's keep focus again Tuesday, when a Spanish union is set to strike in protest of Spain's recently proposed government pay cuts. Meanwhile, Societe Generale's rogue trader faces trial.

Tuesday brings primary elections across several US states, including Tea-Party contention in Nevada. California is another story, where the GOP spent big and put up big name contender Carly Fiorina to compete for a senate seat.

We've been keeping a close eye on the weekly same-store sales data out of the International Council of Shopping Centers (ICSC). Last week's report covering the period ended May 29 offered improvement from the prior week as weekly sales gained 0.6%, versus a -0.8% drop the week before. On a year-to-year basis, the sales growth pace picked up to 2.5%, versus the prior week's 1.3% gain. However, growth has been weakening as comparable data gets tougher to beat. Thus, the absolute level of activity is still nothing to write home about, and economic activity appears to me about to stall.

The corporate news schedule gets busy Tuesday. Transocean (NYSE: RIG) makes its case against BP when it presents at the RBC Capital Markets conference. Dr. Pepper Snapple (NYSE: DPS) will present to shareholders, and General Mills (NYSE: GIS) will split its shares 2-for-1. Lockup curbs expire for the shares of Assured Guaranty (NYSE: AGO), EQT (NYSE: EQT) and International Coal Group (NYSE: ICO).

The EPS schedule includes Bob Evans Farms (Nasdaq: BOBE), C&D Technologies (NYSE: CHP), Cantel Medical (NYSE: CMN), CorVel (Nasdaq: CRVL), CPI Corp. (NYSE: CPY), Dollar General (NYSE: DG), Forest City Enterprises (Nasdaq: FCEA), Mitcham Industries (Nasdaq: MIND), Mobile Telesystems (NYSE: MBT), ModusLink Global (Nasdaq: MLNK), NCI Building Systems (NYSE: NCS), Oil-Dri Corp. (NYSE: ODC), Oxford Industries (NYSE: OXM), Pall Corp. (NYSE: PLL), Pep Boys (NYSE: PBY), Take-Two Interactive (Nasdaq: TTWO), Talbots (NYSE: TLB) and Texas Instruments (NYSE: TXN).

Wednesday

Europe could catch fire again Wednesday if the citizens of Portugal react the way Greece's populace did when its Parliament voted on austerity measures. Portugal's similar vote takes place Wednesday, and it will not slip the attention of the Portuguese despite the pending start to the World Cup. Expect some protests here at home as well today, as President Obama meets with the Palestinian President in Washington.

Federal Reserve Chairman Bernanke will testify before the House Budget Committee Wednesday morning at 10:00 AM. The topics of discussion will include the usual suspects: the economy, financial conditions and the federal budget. Later in the afternoon, the Fed publishes its Beige Book of economic activity (2:00 PM). At 4:00 PM, look for Federal Reserve Chairman Ben Bernanke's address on employment trends at the Richmond Federal Reserve Bank forum.

Wednesday's pre-market data highlights the regular mortgage activity data. For the week ended May 28, the Market Composite Index of mortgage volume increased just 0.9%. All of the week's positive news came from refinancing activity, where the Refinance Index improved 2.4%. Average contracted rates for fixed rate mortgages of 30-year and 15-years in duration stuck low at 4.83% (prior 4.8%) and 4.24% (4.25%), respectively.

The real story was found in mortgage activity around home purchases (both new and existing). Here, the MBA's Purchase Index revealed trouble, as it fell 4.1% last week. In fact, the Purchase Index is near 40% below its level of four weeks ago, when the expiring First-Time Homebuyers Tax Credit incentive was driving real estate demand.

The Wholesale Trade Report for April is due up at 10:00 AM. Barron's reports the consensus forecast for wholesale inventory growth of 0.5%, versus March's 0.4% increase. Increases in energy inventories were offset by decreases in foods. The inventory-to-sales ratio moved to a very low 1.13. That compared against last March's 1.39.

The EIA's Petroleum Status Report is due at 10:30. Last week's data, covering the period ended May 28, showed crude oil status declined by 1.9 million barrels. Gasoline stores fell by 2.6 million barrels, while distillates increased by 0.5 million barrels.

Investment company Needham will hold a health-care forum Wednesday. Tenneco (NYSE: TEN) meets with shareholders, while the lockup period ends for the shares of Concord Medical Services (NYSE: CCM) and Maidenform Brands (NYSE: MFB). The earnings schedule includes AMERCO (Nasdaq: UHAL), Analogic (Nasdaq: ALOG), Brown-Forman (NYSE: BF-B), Ciena (Nasdaq: CIEN), Luby's (NYSE: LUB), Hooker Furniture (Nasdaq: HOFT), Magal Security Systems (Nasdaq: MAGS), Men's Wearhouse (NYSE: MW), Navistar International (NYSE: NAV), Piedmont Natural Resources (NYSE: PNY), PURE Bioscience (Nasdaq: PURE), Repligen (Nasdaq: RGEN), Shuffle Master (Nasdaq: SHFL), Spartech (NYSE: SEH), Stewart Enterprises (Nasdaq: STEI), Titan Machinery (Nasdaq: TITN), Ulticom (Nasdaq: ULCM) and Vail Resources (NYSE: MTN).

Thursday

US markets will be looking eastward to start the day, as the rising sun brings news from the European Central Bank (ECB) and the Bank of England (BOE). Both central banks are expected to keep rates steady, but I have a funny feeling we might see some action. Alarm bells might ring though, should the ECB move to reduce rates, as investor concerns focus on what economic insight the bank might have. The ECB will certainly clarify its recently vaguely described quantitative easing operations, and it will find itself under pressure as it explains why it changed course after saying it would not take such actions only days before (a regular conflict for the ECB). Meanwhile, Deutsche Bank's (NYSE: DB) CEO will head a discussion on the future for European financial integration.

Washington DC drivers will be prevalent Thursday as well, when a House panel reviews the effects of the Deepwater Horizon oil spill. An FDA advisory panel will consider a multiple sclerosis drug from Novartis (NYSE: NVS).

Given the tough Employment Report released for May last week, any improvement in the Weekly Jobless Claims data would be especially welcome Thursday. Last week's jobless claims data improved to an increase of 453K, versus the 463K from the week before that.

Despite favorable expectations with regard to energy imports (on price), economists expect April's International Trade Report to show an expansion of the trade deficit to $41 billion, versus $40.4 billion deficit. Look for the data in the pre-market.

The Quarterly Services Survey (QSS) for Q1 2010 will be reported at 10:00 AM. The QSS is the only source of service industry indicator performance providing timely estimates of revenue and expenses for selected service industries. The QSS for Q4 2009 showed Information Services revenue rose 0.8% over Q3 and 0.5% over Q4 2008.

The EIA's Natural Gas Report is due at 10:30 AM. Last week's data covering the period ended May 28, showed an increase in natural gas inventory of 88 Bcf. Stocks of gas were 308 Bcf above the five-year average and above the upper limit of the average range for this time of year.
The Treasury Budget for May is due for release at 2:00 PM. April's deficit exceeded economists forecasts, coming in at $82.7 billion on a shortage of tax receipts (income for the government). Over the last twelve months, the deficit is still big, running at $2.06 trillion. May typically runs a deficit of $76.6 billion (average of past 10 years), so you can expect one again this sad year. Economists forecast the deficit will run at $140 billion.

Corporate news drivers include a decision by the Hong Kong stock exchange on Agricultural Bank of China's pending $30 billion IPO. Moody's (NYSE: MCO) will hold its shareholder meeting, while Johnson Controls (NYSE: JCI) talks about clean energy.

Reporting EPS, look for data from AEP Industries (Nasdaq: AEPI), A-Power Energy Generation (Nasdaq: APWR), ArcSight (Nasdaq: ARST), Charles River (Nasdaq: CRAI), Cinedigm Digital Cinema (Nasdaq: CIDM), Del Monte Foods (NYSE: DLM), Express (Nasdaq: EXPR), Finisar (Nasdaq: FNSR), Herley Industries (Nasdaq: HRLY), IDT Corp. (NYSE: IDT), lululemon (Nasdaq: LULU), Mad Catz Interactive (AMEX: MCZ), National Semiconductor (NYSE: NSM), Navisite (Nasdaq: NAVI), New Frontier Media (Nasdaq: NOOF) and School Specialty (Nasdaq: SCHS).

Friday

Three economic reports might delay your weekend departure Friday, as Retail Sales, Consumer Sentiment and Business Inventories are in cue. The 8:30 report on May's retail sales is expected to show an increase of 0.4% (+0.4% in April), and 0.2% when excluding auto sales (+0.4% in April). Sales increased 0.4% in April when excluding gasoline sales as well. Looking ahead, auto sales improved in May, but the outlook ex-auto is weaker, as gasoline and retail trade sales might cost the growth pace.

The Reuters/University of Michigan Consumer Sentiment data is due for report at 9:55 AM. Economists are looking for the measure to improve in this early June survey, with confidence expected to have gained to 74.6 on the index, up from 73.6 at last check. Things have deteriorated sharply in June, and so this report is going to prove a non-factor.

April's Business Inventory data is up next at 10:00 AM. Inventories have risen through five of the last six months, as businesses restocked bare shelves. March's report showed a gain of 0.4%, and economists are looking for an increase of 0.5% for April. However, we have recently started to detect signs that restocking may be near saturation, and suspect strategists will miss slippage when it finally occurs. Outside of manufacturing, there simply is not much activity, and recent retail warning bells have our ears raised. However, this data is for April, and may not yet reflect what we describe. We suggest investor caution on this data point for this reason.

The Fed's Charles Plosser and Narayana Kocherlakota are scheduled to speak Friday. Washington Mutual (a short pick of ours well before the stench of bankruptcy caught the market's nose) is seeking bankruptcy court approval to meet to replace its board of directors. Danaher (NYSE: DHR) will split shares 2-for-1. EMC (NYSE: EMC) is discussing virtual storage. The EPS short list highlights data from Arcadia Resources (AMEX: KAD), China-Biotics (Nasdaq: CHBT) and Lakeland Industries (Nasdaq: LAKE).



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