Stock Market Primer - EU Protests Set Against Housing Data

It was just yesterday when I was sharing a thought with a Greek-American singer about how Greece has calmed, but she warned me that summer was over and the sun is setting on peace. Her wisdom was timely, as today Greeks took to the streets again on the call of the nation’s two largest unions. Their goal was to protest a new round of cuts demanded by the EU and IMF. Sure enough, European stocks are deeply lower today. And because of protests in Spain, its sovereign bond yields soared today approaching levels that preceded the latest ECB solution. The iShares S&P Europe 350 (NYSE: IEV) is likely heading lower today as a result, though for the U.S., with housing news on the slate, the SPDR S&P 500 (NYSE: SPY) and the SPDR Dow Jones Industrials Average (NYSE: DIA) were holding their ground; the PowerShares QQQ (Nasdaq: QQQ) was edging lower though to start the morning.

International Markets

EUROPE	ASIA
EURO STOXX 50: -2.2%	S&P/ASX 200: -0.3%
Germany’s DAX: -2.0%	Japan NIKKEI 225: -2.0%
France’s CAC 40: -2.3%	Hang Seng: -0.8%
FTSE 100: -1.2%	Shanghai Shenzhen CSI 300: -1.1%
Spain’s IBEX 35: -3.4%	India BSE SENSEX 30: -0.3%
Greece’s ASE: -0.9%	Singapore Straits Times: -0.7%

Economic Data Schedule
After yesterday’s reports on home pricing, even more housing news arrives Wednesday morning, when the New Home Sales Report is released at 10:00 AM. Economists see the annual pace of new home sales improved in August to 380K, up from 372K reported for July. This report is critical for the shares of homebuilders, especially after their latest gains adding on to a rich run for the year. The SPDR S&P Homebuilders (NYSE: XHB) is up 48% year-to-date, after adjustments for splits and dividends.

Adding on to the new home sales data, the Mortgage Bankers Association (MBA) offers its latest on mortgage activity. Last week’s Weekly Applications Survey indicated the Market Composite Index of mortgage activity edged lower by 0.2% for the week ending September 14. This was despite the record low mortgage rates reported for some types of loans. It may still be too soon to look for gains on the latest Fed actions in new data, especially given the holidays through the latest period.

The Energy Information Administration (EIA) offers up its latest Petroleum Status Report at 10:30 AM. Oil prices have been on the decline of late, with focus turning to soft demand on global economic weakness, and assurances of supply by some OPEC stalwarts. However, with major Middle East leaders including the famous figure-head of Iran speaking at the United Nations, oil should find some footing here.

As of 8:30 this morning, the NYMEX Crude Future was down 1.4% to $90.12, Dated Brent Spot was lower by 1.1% to $109.50 and WTI Cushing Spot was down 0.7% to $90.99. The shares of Exxon Mobil (NYSE: XOM) were indicating lower by 0.4% in the early going.

Last week’s data for the week ending September 14, U.S. commercial crude oil inventories increased by 8.5 million barrels. Stores were in the upper limit of the average range for this time of year. Total motor gasoline stocks decreased by 1.4 million barrels; inventory is in the lower half of the average range for this time of year.

Traders will want to be aware of the schedule for stocks in the news today. The highlights Concho Resources (NYSE: CXO) and its presentation at the IPAA OGIS San Francisco. BNP Paribas (OTC: BNPQY) is presenting at the Bank of America / Merrill Lynch Banking & Insurance CEO Conference. The earnings slate has news from Landec (Nasdaq: LNDC), Progress Software (Nasdaq: PRGS), Texas Industries (NYSE: TXI) and Worthington Industries (NYSE: WOR).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumer Confidence is Hopeful at Best

In my report, Consumer Stocks Face Dangerous Stopper, I wrote, “I am expecting the Conference Board's measure to mark improvement, so be at ease.” Today, the Conference Board reported its Consumer Confidence Index gained nine points in September on its way to an index mark of 70.3. The consumer mood tracked the rise in stocks through the month (SPDR S&P 500 (NYSE: SPY) up 3.7%), and probably likewise benefited from reassurance by the European Central Bank (ECB) and expectations for a dovish Federal Reserve action which later followed.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Consumer Confidence

Because the cutoff date for the survey was September 13, it only benefited ever so slightly from the Federal Open Market Committee (FOMC) monetary policy announcement and quantitative easing declaration. Still, it obviously benefited from the buildup of expectations for it through the month. Along with stocks, I believe it also has Mario Draghi and his creative and aggressive action, which I believe has effectively mitigated the European debt crisis (note, the economic crisis goes on), to thank. Of course, the mood of consumers is going to be less closely tied to the direct actions of the ECB at close proximity to those actions, and more responsive to the effects of those actions. It will more immediately be driven by the gains of capital markets and stocks, given the widespread ownership of them through retirement savings accounts.

“The whim of hope is represented here without a trace of tangible prosperity to anchor to.”

However, the consumer confidence gain, while hinged on the rise of forward looking equities and not on the employment situation or the pace of GDP, is superficial. The same superficiality applies for stock valuations in my opinion. You can see the consumer superficiality in the details of the report itself and in anecdotal data about the economy and corporate outlook. The Expectations Index, a measure of forward looking feelings for consumers, gained by 12.6 points on its way to a mark of 83.7. The whim of hope is represented here without a trace of tangible prosperity to anchor to.

The Present Situation Index, which better reflects how things really are today among Americans, also gained, but by only 3.7 points to a still unimpressive level of 50.2. And when you look more deeply into where specific surveyed issues ranked and what little the “improvement” actually means, you understand how hopeful this index really is today.

Surveyed Issue	Level	Change
Business Good	15.5%	+0.2%
Business Bad	33.3%	-1.0%
Jobs Plentiful	8.3%	+1.1%
Jobs Hard to Get	39.9%	-0.7%
Business to Improve	18.2%	+1.5%
Business to Worsen	13.8%	-3.8%
Expect More Jobs	18.5%	+2.7%
Expect Less Jobs	18.5%	-5.2%

In my view, consumers are less relevant respondents with regard to forward looking information. I think this is evident in the relatively lower overall response rate to the last four rows of the survey topics depicted above here. Also, they are nearly evenly divided on forward looking issues, and certainly less opinionated with regard to the outlook, which may simply reflect uncertainty. Uncertainty, in and of itself, is bad for equities, and probably to some lesser degree, also bad for consumer spending. Looking at the jobs and business questions for the present time, sentiment improved, but remains at absolutely poor levels.

Another report also issued today showed real consumer spending softening. The weekly chain store sales data reported by the International Council of Shopping Centers (ICSC) showed a week-to-week sales gain of just 0.6% in the period ending September 22nd, and that followed the prior week decline of 2.5%. Now these data may be holiday impacted, but the year-to-year change was also relatively unimpressive at +2.9% (last week it was +2.1%). The rate of growth barely edges inflation, with the latest Consumer Price Index showing price rise of 1.9% year-to-year in August, excluding food and energy price change. Redbook reported year-to-year chain store sales today up just 2.0%.

Anecdotal evidence among a significant number of companies shows a tighter competitive environment, as consumers selectively choose within perhaps saturated retail capacity. In tight economic conditions, if shopping activity loses robustness, then there will be less pie to share among competitors. For this reason, companies like J.C. Penney (NYSE: JCP) and Sears (Nasdaq: SHLD) are finding difficult times and resolving to profound change in operating strategy. For this reason, shoppers are gravitating towards lower cost value store options, driving market share gains for the likes of Wal-Mart (NYSE: WMT), eBay (Nasdaq: EBAY), Amazon.com (Nasdaq: AMZN) and Dollar Tree (Nasdaq: DLTR).

So, despite this latest consumer confidence swing, I suggest investors look toward more tangible evidence of consumer spending, like that seen in the chain store sales data. This Friday, an even better measure of the consumer mood will be reported. Look toward the Personal Income & Outlays data, and what it says about real consumer spending, excluding the impact of price change, for a better guide into the state of mind of American consumers.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumers Manufacturing & Housing Key the Week

The week ahead keys on three points, consumers, manufacturing and housing, just the way we like it. These three factors are playing such important roles in investor decision making these days that they’ll offer some good fodder for debate and discussion, and maybe volatility as well. Obviously, the data will continue to be drowned out by geopolitical chaos and global macroeconomic deterioration. Plus there’s that little yearly lambasting provided by Iran’s President at the United Nations in New York to look forward to, and the accompanying wars and rumors of wars to argue about. Last week, the SPDR S&P 500 ETF (NYSE: SPY) fell fractionally.

The Week Ahead

Monday
Manufacturing data is on tap to start the week with the reporting of the Dallas Fed’s Manufacturing Survey at 10:00 AM EDT. Just last week, we heard from the New York Fed, Philly Fed and we received the Markit PMI Manufacturing Index Flash. Economists surveyed by Bloomberg see the Dallas Fed index improving to +0.5, from -1.6 in August.

Manufacturing Index	Reported	Expected
Empire State Index	-10.4	-2.0
Philly Fed Index	-1.9	-4.0
Markit PMI Index	51.5	51.5

Before the new manufacturing data reaches the wire though, we’ll get a look at the Chicago Fed’s National Activity Index at 8:30 AM EDT. In July, the index improved but remained in tough territory at negative 13, versus minus 15 in June.

At 3:10 PM ET, look for a speech by San Francisco Fed Bank President John Williams, after which he will take questions.

The day’s corporate wire has annual shareholder meetings at General Mills (NYSE: GIS), FedEx (NYSE: FDX), Caterpillar (NYSE: CAT) and Flagstar Bancorp (NYSE: FBC). Look for earnings reports from Lennar (NYSE: LEN), Paychex (Nasdaq: PAYX), Red Hat (NYSE: RHT), pSividia (Nasdaq: PSVD) and Ennis (NYSE: EBF).

Tuesday
Last week offered a slew of housing data, and this week offers a good deal more relative news. At 9:00 AM ET Tuesday, the S&P Case Shiller Home Price Index is expected to show another month of price increase, this time for July. Economists surveyed by Bloomberg see the 20-city composite rising 0.9% on a seasonally adjusted basis. That would follow June’s reported increase of the same. On a year-to-year basis, sales are expected to have grown by 1.2%, following June’s 0.5% increase.

At 10:00 AM, we’ll get the House Price Index from the Federal Housing Finance Agency (FHFA). This index covers single family housing units based on Fannie Mae (OTC: FNMA.OB) and Freddie Mac (OTC: FMCC.OB) data. Economists see this index showing a 0.8% increase in home prices for July. It would follow June’s 0.7% rise.

Another regional manufacturing data point finds the wire Tuesday, with the Richmond Fed’s Manufacturing Index scheduled for 10:00 AM release. Economists see this index continuing to portray a difficult environment, though to a lesser extent; the index is seen improving to negative 4 from negative 9 in August.

The Conference Board reports on Consumer Confidence at 10:00 AM this Tuesday. Economists see this measure of the consumer mood improved from its dramatic 4.8 point drop in August. The consensus view is for improvement to 64.8 in September, up from 60.6. In its absolute state, the figure still reflects poor consumer conditions and trouble for the economy.

State Street (NYSE: STT) reports on Investor Confidence at 10:00 AM. This measure looks at the risk taken by institutional investors. In August, the index fell to 90.0, from 94.0 in July. I would expect the measure to have improved substantially in September, as stocks gained globally on ECB chatter and Fed hopes.

We receive the two regular chain store sales reports every Tuesday morning. Last week the report from the International Council of Shopping Centers (ICSC) showed a negative 2.5% decline in sales week-to-week. On a year-over-year basis, sales only edged up 2.1% for the period ending September 15, which is a negligible change given the rate of inflation. Redbook’s measure of year-to-year chain store sales change showed just a 2.4% increase.

The equity schedule has ONEOK (NYSE: OKE) and LeMaitre Vascular (Nasdaq: LMAT) hosting investors and analysts. Cardium Therapeutics (NYSE: CXM) presents at the Noble Financial Markets Life Sciences Exposition. The earnings schedule highlights Carnival (NYSE: CCL), CalAmp (Nasdaq: CAMP), Copart (Nasdaq: CPRT), FactSet (NYSE: FDS), Jabil Circuit (NYSE: JBL), Lentuo International (NYSE: LAS), Neogen (Nasdaq: NEOG), OMNOVA Solutions (NYSE: OMN), Park City Group (Nasdaq: PCYG), SYNNEX (NYSE: SNX), Synthesis Energy Systems (Nasdaq: SYMX) and Vale Resorts (NYSE: MTN).

Wednesday
Even more housing news arrives Wednesday morning, when the New Home Sales Report is released at 10:00 AM. Economists see the annual pace of new home sales improved in August to 380K, up from 372K reported for July.

The Mortgage Bankers Association (MBA) offers its latest on mortgage activity in the pre-market. Last week’s Weekly Applications Survey indicated the Market Composite Index of mortgage activity edged lower by 0.2% for the week ending September 14. This was despite the record low mortgage rates reported for some types of loans.

The Energy Information Administration (EIA) offers up its latest Petroleum Status Report at 10:30 AM. Oil prices are on the decline of late, with focus turning to soft demand on global economic weakness, and assurances of supply by some OPEC stalwarts. For the week ending September 14, U.S. commercial crude oil inventories increased by 8.5 million barrels. Stores were in the upper limit of the average range for this time of year. Total motor gasoline stocks decreased by 1.4 million barrels; inventory is in the lower half of the average range for this time of year.

The corporate news schedule highlights Concho Resources (NYSE: CXO) and its presentation at the IPAA OGIS San Francisco. BNP Paribas (OTC: BNPQY) is presenting at the Bank of America / Merrill Lynch Banking & Insurance CEO Conference. The earnings slate has news from Landec (Nasdaq: LNDC), Progress Software (Nasdaq: PRGS), Texas Industries (NYSE: TXI) and Worthington Industries (NYSE: WOR).

Thursday
Durable Goods Orders are set for report at 8:30 AM. Economists surveyed by Bloomberg see orders falling 5.0% in August, after rising 4.2% in July. Excluding transportation, orders are seen edging up 0.2%, against a 0.4% decline in July. The timing of transportation orders played a big role in last month’s results as well.

Revised GDP data for the second quarter is due for 8:30 reporting, but economists see the 1.7% growth quoted at last check sticking again Thursday. The GDP Price Index is likewise expected to hold at +1.6%.

Will this be the week? We have been warning that one fateful week, initial jobless claims will breach 400K and impact equities in a meaningful manner. However, this time around economists see claims easing a bit to 376K, from 382K reported last week.

At 9:45 AM, the weekly Bloomberg Consumer Comfort Index offers some complement to the Conference Board report of a couple days earlier. In the week ending September 20, the index gained 1.4 points to negative 40.8.

A busy day for data serves up yet another housing data point at 10:00 AM, when Pending Home Sales is reported for the month of August. Economists see this forward looking measure marking a 0.3% increase, though that is a slower rate of gain than the 2.4% increase reported for July.

One more manufacturing data point finds the wire at 11:00 AM when the Kansas City Fed produces its Manufacturing Index. Economists see the Midwest measure marking 5 in September, down from 8 in August.

The EIA reports on Natural Gas Inventory at 10:30 AM. For the week ending September 14, natural gas inventory increased by 67 Bcf, leaving stores 278 Bcf above the five-year average for this time of year.

The corporate wire has analysts days at Urban Outfitters (Nasdaq: URBN) and Advisory Board (Nasdaq: ABCO). Axcelis Technologies (Nasdaq: ACLS) is presenting to the Craig-Hallum Alpha Select Conference. Earnings reports highlight news from Nike (NYSE: NKE), Accenture (NYSE: ACN), McCormick & Co. (NYSE: MKC), Discover Financial (NYSE: DFS), Micron Technology (NYSE: MU) and Global Payments (NYSE: GPN). Also find reports from Actuant (NYSE: ATU), AZZ (NYSE: AZZ), IDT (NYSE: IDT), Radiant Logistics (Nasdaq: RLGT), S&W Seed (Nasdaq: SANW) and Sealy (NYSE: ZZ).

Friday
Three important reports cap off the week in a meaningful way. The most significant of the three, in my view, comes first with the reporting of Personal Income & Outlays for the month of August. Real spending results offer better insight into consumers than the sentiment indexes which litter the week as well. Economists see personal spending up 0.5% in August, after a 0.4% increase in July. It would be good news if it holds true, but we need to account for price change as well.

The Fed’s favorite inflation gauge is also found in this report. The PCE Price Index is expected to have moved 0.5% higher in August, though on volatile food and energy action. The Core PCE Price Index is expected to have gained only by 0.1%, which compares against its unchanged status in July. Personal income is seen up 0.2%, against a 0.3% increase in July. Salaries and wages have less pressure against them than in recent years past, but caution is likely the current mantra of human resources representatives, given nascent economic sluggishness.

One last manufacturing data point finds the wire at 9:45 AM when the Chicago Purchasing Managers Report comes due. Economists see this report for September holding the Business Barometer Index steady at 53.0.

Keeping with the theme, one more consumer sentiment release closes out the week. The Reuters University of Michigan Consumer Sentiment Index is up at 9:55 AM. Economists are looking for a read of 79.0, versus the 79.2 marked at mid-month. That last reading marked a significant improvement from the time before.

The last trading day of the month offers corporate presentations from Diversified Restaurant Holdings (OTC: DFRH), Gas Natural (Nasdaq: EGAS), Gibraltar Industries (Nasdaq: ROCK), MOD PAC (Nasdaq: MPAC) and Sucampo Pharmaceuticals (Nasdaq: SCMP). Look for earnings from Walgreen (NYSE: WAG), American Greetings (NYSE: AM), Finish Line (Nasdaq: FINL), SinoCoking Coal and Coke Chemical Industries (Nasdaq: SCOK), Tianyin Pharmaceutical (NYSE: TPI) and WSP Holdings (NYSE: WH).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Housing Market in Recovery

What a week! It has been chock-full of housing data, with homebuilder sentiment, mortgage activity, existing home sales and housing starts all reaching the wire. Judging by the movement of housing stocks, we could confidently say the message conveyed was generally positive. The SPDR S&P Homebuilders (NYSE: XHB) gained 1.8% Wednesday after the two most key reports were published.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Housing Market Recovery

Looking at one of those, we discussed the Housing Starts data in detail in a report published on Wednesday. The government report offered mildly positive news for the housing industry, with Starts up 2.3% in August, but that growth was short of economists’ expectations. Also, looking forward, permits authorized for future housing starts declined by 1% in August, but met the economists’ consensus and were still 24.5% above the prior year level of activity. The shares of builders gained on the news and on the other data released Wednesday.

Homebuilder	Wednesday’s Change
Ryland Group (NYSE: RYL)	+5.7%
M.D.C. Holdings (NYSE: MDC)	+2.4%
NVR (NYSE: NVR)	+1.1%
Hovnanian (NYSE: HOV)	+1.6%
Lennar (NYSE: LEN)	+1.9%
Beazer (NYSE: BZH)	+6.2%
Meritage (NYSE: MTH)	+2.5%

Existing Home Sales data were the real catalyst for stocks Wednesday, driving even the SPDR S&P 500 (NYSE: SPY) higher, before it gave back ground in the last several minutes of trading. Sales of existing homes jumped 7.8% in August to their best pace in two years and well ahead of economists’ expectations. Growth was indiscriminate, reaching higher by nearly equal degree across the geographical markets of the Northeast, Midwest, South and West. The report signaled that the health of the real estate market had improved substantially. The median price of a home nationally was up 9.5% against the prior year, and marked solid month-to-month increase as well. Inventory was down, as was the percentage of distressed sales to the total. The news was so enthusing that it lifted stocks across the real estate sector, including mortgage lenders, title insurance providers, mortgage insurance providers and peripheral suppliers of construction materials.

Company	Wednesday’s Change
Bank of America (NYSE: BAC)	+0.7%
Citigroup (NYSE: C)	+0.7%
PNC Financial (NYSE: PNC)	+0.7%
SunTrust Banks (NYSE: STI)	+1.2%
PHH Corp. (NYSE: PHH)	+2.6%
MGIC Investment (NYSE: MTG)	+1.9%
Radian Group (NYSE: RDN)	+6.4%
Home Depot (NYSE: HD)	+1.0%
Lowes (NYSE: LOW)	+1.4%
USG (NYSE: USG)	+1.7%

The latest Weekly Applications Survey was published by the Mortgage Bankers Association (MBA) Wednesday morning as well. It showed mortgage activity held about steady in the week ending September 14. The real good news was found in its measurement of mortgage rates, which mostly declined in the period. The Existing Home Sales Report had shown a slight increase in average contracted mortgage rates in August. However, the latest quantitative easing program by the Federal Reserve is expected by most to lower rates even further.

It would be a little premature to expect to find any impact from the Fed announcement or mortgage backed securities purchases in this week’s data, but coming weeks could be affected. Still, rates on 15-year fixed rate mortgages reached a historic low in the latest period, dropping to 3.03%, and the average rate for FHA sponsored 30-year fixed rate mortgages held at its historical low of 3.5%.

On Tuesday, the National Association of Home Builders (NAHB) reported its Housing Market Index (HMI). The HMI is a measure of homebuilder sentiment, and has been deeply underwater for quite some time now. A mark under 50.0 for the HMI signifies that more builders view the state of homebuilding negatively than positively.

For the fifth straight month, the HMI improved, this time by three points to a mark of 40. It does not seem like good news, considering the index remains 10 points short of breakeven, but consider that it has not been this high since June of 2006. The best of the good news is that sentiment is improving across measured factors. The component index measuring current sales conditions improved four points to 42; the component measuring expectations for the next six months improved by eight points to 51; and finally, the component measuring the traffic of prospective buyers increased by a point to 31. Regionally speaking, the Midwest and West led with five point gains to 40 and 43, respectively. The South recorded a four point gain to 36, and the Northeast took back two points to 30.

So there you have it, four data points illustrating an improving real estate sector. It’s quite ironic that the real estate sector is improving just as the economy seems to be deteriorating, as traditionally, real estate has been a key catalyst of economic growth. It may just be that because of the structural changes of homeownership, with mortgage loans harder to qualify for, and given the still underemployment burdened economy, real estate doesn’t have the power to drive us higher by itself currently. Also, what has been a catalyst for growth of our economy more recently, the global marketplace, is currently dysfunctional and burdensome, at least in part. The usual intangibles, like geopolitical threats, are as scary as they ever were. Because of these issues, the vulnerability of our economy, and the cyclical nature of real estate, I remain concerned that this nascent housing strength could be quickly undermined.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Huge Gains Possible for European Stocks

The debt crisis of Europe is effectively over, thanks to the latest efforts of Mario Draghi and the European Central Bank (ECB), and supported by the all clear given to the European Stability Mechanism (ESM). You can look toward the turn achieved by U.S. stocks in March 2009 for guidance into the huge capital gains possible for European markets now. Of course, some of those gains have already been taken since the bold statement of the ECB chief in late July. The iShares S&P Europe 350 (NYSE: IEV) has charged forward approximately 15% since the July 26 statement, and American banks with ties to global markets are up even more. Yet, European shares and relative securities could have much more to gain. Though, the dynamic risks of the day could also alter the path of Europe from that taken by American stocks post our financial crisis.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

In March of 2009, it seemed to most Americans, and especially stock market participants, that all was lost. Yet, in the depths of the financial crisis, and well before economic recovery began, stocks marked bottom. That fateful day, March 3, 2009, was the point of inflection. From that day through the end of 2009 the SDPR S&P 500 ETF (NYSE: SPY) gained roughly 63%.

Obviously, serious obstacles remain which might alter the recovery scenario for Europe. For instance, if war breaks out in the Middle East, involving Iran, Israel, other Middle Eastern nations and global powers, all bets are off. The Iran war factor is neither negligible nor insignificant.

Likewise, political disruption within struggling European nations could alter the path for European shares. For instance, the last elections in Greece reflected the frustration of the Greek people with harsh austerity and almost led to Greece’s withdrawal from the euro zone. The result of such an event could have driven similar change in other PIIGS nations, and taken the euro-zone down a completely different direction. Those risks remain.

Finally, economic deterioration within Europe could spark up concern again. For instance, if the rating agencies, Standard & Poor’s (NYSE: MHP) and Moody’s (NYSE: MCO), downgrade Germany’s sovereign debt rating, that would reignite concern. A warning has already been issued to Germany, and its economy has begun to show cracks.

Another group that should benefit substantially from gains made by Europe are the banks with substantial risk tied to the region and the system. This is why the shares of Citigroup (NYSE: C), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) have participated in the latest three months of gains. The shares of Citigroup (C), for instance, are up 32% since July 26; the rest of the group is up similarly. It’s quite ironic that it was Citigroup which sparked the turnaround in American stocks in 2009, when it first reported good news. Other bankers, including Jamie Dimon of JPM, added to the change in tone and stocks never looked back.

In conclusion, I reiterate that while substantial opportunity exists for European and related securities, special dynamic risks could hamper the repeat of what American stocks accomplished in 2009. As always, you are advised to pay close attention to developments and risks, and welcomed to follow my feed which will likewise do so.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Retail Sales Report for August Crimped by Gas Prices

In a day offering the first real test for stocks since the latest Federal Reserve quantitative easing program, with five economic reports on the slate, Retail Sales led the opposition. You would have thought that retail sales growth of 0.9% on the month, a Street beating figure (consensus at +0.8%), would be good news. However, as always, I’m here to put the report under the microscope and show you why it is not.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

While sales beat Wall Street on the headline, our survey of the report shows that to prove misleading. The first important point to make is that Retail Sales for the month before (July) were revised lower, to +0.6%, from +0.8% when reported initially. The effect of lowering your basis for comparison is to raise the percentage gain for the current period if the result comes close to being in line. Thus, unlike the percentage change superiority over the economists’ consensus, you bet your bottom dollar that the absolute forecast figure for the consensus is closer to the absolute real result for August.

The second point I want to make is that this data does not adjust for price changes, and so is influenced by price changes, including in volatile food and energy. Thus, when we take out the sales of autos and gasoline, we find that those sterilized retail sales only increased by 0.1%, against the revised higher July gain of 0.9%. Wall Street is not stupid, and so incorporated the monthly increase in gasoline prices to find an adjusted expectation for a 0.4% gain here. Obviously, that’s still too high and so the result is a disappointment on all counts.

Looking within this data, we see the catalyst is not autos. Ex-auto sales still increased 0.8% in August, off the unadjusted prior increase of 0.8% in July. So, you can contain your concern for Ford (NYSE: F) and General Motors (NYSE: GM) that might have been tied to this report. Those two stocks were up in the early going, probably because of market focus on this line detail.

However, gasoline station sales gained sharply on the higher price of gas in August. Those sales rose 5.5% against July, driving the top line of companies like The Pantry (Nasdaq: PTRY), but also of course Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX).

Retail trade sales, which is what most people think about when they hear this report cited, increased by 0.9% in August, against the 0.7% gain in July. However, we’ll need to once again focus on the specific types of sellers to really glean anything important for the stocks you own. General Merchandise Store sales declined by 0.3% in August, after a 0.1% increase in July. While this category would include Wal-Mart (NYSE: WMT), it also includes non-discount department stores like Sears (Nasdaq: SHLD), Macy’s (NYSE: M) and J.C. Penney (NYSE: JCP). Though department store sales, when broken out, rose 0.1% in August, against their 0.8% gain in July. I think that what this data is telling us is that the pie shrinking and so there will be winners and losers when these companies next report earnings.

Ahead of the new Apple (Nasdaq: AAPL) iPhone release, the sales of Electronics and Appliance Stores like Best Buy (NYSE: BBY) fell by 1.4% in August, versus their 1.0% gain in July. Obviously, things will change as we incorporate the new iPhone into forward sales.

Supporting the case for homebuilders and renovators, the sales of Building Material and Garden Equipment Supplies Dealers like Home Depot (NYSE: HD) increased by a solid 1.0% in August, following the 1.2% gain made in July.

Food and beverage sellers, including grocery stores, saw sales unchanged in August. Without incorporating any change in food prices in the month, this could be due to less eating out at casual dining establishments like those provided by Brinker International (NYSE: EAT) and Darden (NYSE: DRI) restaurants. With regard to grocery, Wal-Mart is gaining share from traditional markets like those provided by Supervalu (NYSE: SVU) and Kroger (NYSE: KR).

Clothing and accessories stores like Abercrombie & Fitch (NYSE: ANF) and The Gap (NYSE: GPS) may not have gotten a good enough lift from back-to-school shopping, given the segment’s sales declined 0.1% against July. Of course, this is also going to be a fashion and smaller pie story, with some stores gaining as others lose customers.

Non-store retailers, including some of America’s favorite destinations like eBay (Nasdaq: EBAY) and Amazon.com (Nasdaq: AMZN) saw no change in August sales, against a 1.9% increase in July. We might pin the July gain to the heat, keeping consumers in their air conditioned homes, shopping away on their laptop. August is a holiday period, but no change is unexpected here, given the heat and also back-to-school. Perhaps consumers don’t have time to wait for shipping, or be home to receive during the vacation period ahead of the start of school, but that’s just speculation. We’ll have to wait on September to know for sure.

All in all, August looks like a disappointment for retail sales in my estimation, save perhaps the auto industry and gasoline providers, and also the construction materials peddlers. It may be the higher price of gasoline that hurt the rest of the sector. As it looks like gasoline prices are only going higher from here, given geopolitical fires and capacity constraints, not much should change for the better. The consumer mood is deteriorating on a once again apparently weakening domestic economy. In conclusion, this report supports my case for the spread of recession to our shores not too long from now.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Market Faces First Big Test Post Fed Today

Friday offers the first real test for stocks post Federal Reserve action, with five economic reports on the slate. If the data is sour enough, it could throw water on the Fed’s fire, which sent the SPDR S&P 500 (NYSE: SPY) and the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) up 1.5% Thursday, and the PowerShares QQQ (Nasdaq: QQQ) up 1.4%.

The first big report is the Retail Sales Report for the month of August. Economists are looking for top line sales growth of 0.8% in August to match July’s pace. When excluding auto sales, economists see the same pace of 0.8%, also matching July’s pace. However, when excluding autos and gasoline, economists see sales growth of 0.4%, short of July’s 0.9% increase.

The Consumer Price Index (CPI) is set for release, and economists are looking for it to show a 0.6% increase for August. That would mark a sharp contrast from July’s price stagnation. When excluding food and energy prices, the Core CPI is seen increasing 0.2%, versus the 0.1% increase in July.

Industrial Production is expected to have contracted 0.1% in August, versus the 0.6% expansion seen in July. Manufacturing production is seen contracting a greater 0.2%, after growing by 0.5% in July. As a result, economists believe Capacity Utilization will have declined to 79.2%, from 79.4% in July.

The University of Michigan, with Reuters, reports its Consumer Sentiment Index. After the Conference Board’s big slide last week, economists see the Michigan figure dropping as well, to 73.5, from 74.3 at last report.

Business Inventories will be reported, and economists see a July increase of 0.5%. That matches against June’s increase of 0.1%. Just like with the wholesale data earlier in the week, you’ll want to compare the inventory to sales to get a better read of things.

Atlanta Fed President Dennis Lockhart has a speaking engagement at 1:00 PM EDT. It will perhaps offer some closure to the week, filled with Fed decision and a slew of important economic news. The day itself offers a true test for stocks though, as they’ll face data for the first time since the Fed action. My thesis is that over time, ongoing weak data and other factors will overcome false Fed hopes.

Overseas, European finance ministers are meeting in Cyprus, another distressed member of the EU, to discuss the direction of their debt crisis.

As for stocks, the SEC will be reviewing automated trading and how algorithms and anonymity have gone awry. They’ll be figuring out how to back up tricky technology capable of turning over a market. Boeing (NYSE: BA), Lockheed Martin (NYSE: LMT), Republic Services (NYSE: RSG) and Dana Holding (NYSE: DAN) will all be presenting at a Morgan Stanley conference. Tyco International (NYSE: TYC) shareholders will vote on the spinoff of the company’s ADT home and personal security business. Towers Watson (NYSE: TW) has its analysts day, and EPS reports are scheduled for Ossen Innovation (Nasdaq: OSN), Sutor Technology (Nasdaq: SUTR) and WPCS International (Nasdaq: WPCS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Fed Statement, Economic Projections and Bernanke's Press Conference

Release Date: September 13, 2012

For immediate release

Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

Also published today:

• Statement Regarding Transactions in Agency Mortgage-Backed Securities and Treasury Securities
• Economic Projections Materials
• Transcript of Prepared Remarks of Chairman Bernanke

Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.