It's All About The Fed This Week

It’s all about the Federal Reserve this week, and its long anticipated September meeting, with expectations set high for Fed action this month. Any failure to act in significant fashion would mark an important let down to markets that have been rising on mostly Fed and ECB hope for the last several months.

Monday
New Consumer Credit data will be published for the month of July at 3:00 PM EDT Monday. Economists surveyed by Bloomberg expect credit expanded by $9.8 billion through the month. In June, credit expanded by $6.5 billion, after expanding by $16.7 billion in May.

Financial services companies including Bank of America (NYSE: BAC) and Unum (NYSE: UNM) will be talking themselves up at a Barclay’s (NYSE: BCS) conference in New York. The Morgan Stanley (NYSE: MS) Healthcare Conference has reports scheduled from McKesson (NYSE: MCK), Watson Pharmaceuticals (NYSE: WPI) and WellPoint (NYSE: WLP). Estee’ Lauder (NYSE: EL) is presenting at the CLSA Investor’s Forum. The earnings slate has news from Astoria Financial (NYSE: AF), Casey’s General Stores (Nasdaq: CASY), Elecsys (Nasdaq: ESYS), Epoch Holding (Nasdaq: EPHC), Farmer Brothers (Nasdaq: FARM), Five Below (Nasdaq: FIVE), Globus Maritime (Nasdaq: GLBS), L&L Energy (Nasdaq: LLEN), Limoneira (Nasdaq: LMNR), Majesco Entertainment (Nasdaq: COOL), Optical Cable (NYSE: OCC), Orchard Supply Hardware (NYSE: OSH), Palo Alto Networks (Nasdaq: PANW), Peregrine Pharmaceuticals (Nasdaq: PPHM), RF Industries (Nasdaq: RFIL), Shuffle Master (Nasdaq: SHFL) and Titan Machinery (Nasdaq: TITN).

Tuesday
September 11th will always be a difficult date for me and so many of you. To be honest with you, I wish it would just pass quickly and peacefully. May those souls rest in peace and those painful memories fade away. Some say “We will never forget,” but truth be told, I wish I could.

The National Federation of Independent Business (NFIB) reports its Small Business Optimism Index for August in the early morning. According to a survey by Bloomberg, economists expect a slight improvement in the small business mood, with the consensus forecast seeing an increase in the index to 91.5 in August, up from 91.2 in July. The range of views extends from 90.0 to 93.0. Based on my observation that small businessmen seem to favor Republicans, I would expect any gain made on Mitt Romney inspired hopes might dissipate at next reporting, based on current presidential polls.

International Trade data for July will be reported at 8:30 AM. The trade deficit shrank in June, on 1.5% lower imports overall and on lower oil prices. Exports edged up 0.9%, benefiting from higher agricultural prices. Economists see the trade deficit widening to $44.3 billion in July, after dropping significantly to $42.9 billion last month.

The International Council of Shopping Centers (ICSC) reports on Weekly Chain Store Sales in the early AM as well Tuesday. Last week’s data showed sales fell 0.4% week-to-week, but was up 3.7% against the prior year period, likely on a back to school push. Redbook had the year-to-year change at 2.5%.

The U.S. Energy Information Administration (EIA) publishes its short-term oil outlook. Oil has been in the cross-hairs, given the interplay of macroeconomic factors tied to demand, Fed stimulus and Iran. The report should be widely followed as a result and for good reason.

The Morgan Stanley Healthcare Conference highlights reports from Merck (NYSE: MRK), Medtronic (NYSE: MDT), Amerisource Bergen (NYSE: ABC) and CVS Caremark (NYSE: CVS). Dell (Nasdaq: DELL) will address a Raymond James conference and Capital One Financial (NYSE: COF) addresses the Barclay’s conference. Addressing investors or analysts, Deutsche Bank (NYSE: DB), Yingli Green Energy (NYSE: YGE) and MetLife (NYSE: MET). The day’s earnings schedule has reports from AEP Industries (Nasdaq: AEPI), Frequency Electronics (Nasdaq: FEIM), General Finance (NYSE: GFN), Globecomm (Nasdaq: GCOM), Hanwha Solarone (Nasdaq: HSOL), Palatin Technologies (NYSE: PTN), RG Barry (NYSE: DFZ) and United Natural Foods (Nasdaq: UNFI).

Wednesday
The long awaited Federal Open Market Committee (FOMC) meeting begins Wednesday morning. You can bet all excitement about the market will be centered around this event and Thursday’s policy statement.

Germany’s constitutional court is mostly expected to vote in favor of Germany’s participation in the permanent euro-zone bailout plan and fiscal accord for budget discipline. Meanwhile, the European Commission (EC) presents its plan for a single banking supervisor. Also, EC President Jose Manuel Barroso will give his state of the union address.

Apple Inc. (Nasdaq: AAPL) is expected to introduce a new Apple iPhone product Wednesday. Our recent work on Apple discussed the pros of an Apple stock split and the argument against an Apple stock split.

We’ll get the latest Import & Export Prices for the month of August at 8:30 AM EDT. Economists expect export prices rose 0.5% in August, equaling the gain reported for July. However, import prices are seen climbing 1.5%, against a 0.6% decrease in July.

Look for the latest Wholesale Trade data release at 10:00 AM. Economists expect wholesale inventories increased 0.4% in July, versus the 0.2% drop in June. You’ll want to compare how inventories match to wholesale sales for a true measure of the state of economic demand.

The Mortgage Bankers Association (MBA) offers its latest Weekly Mortgage Applications Survey as usual Wednesday morning. Last week’s report covering the period ending August 31 showed applications for mortgages declined by approximately 2.5% week-to-week. While the data is reported to be seasonally adjusted, from past experience we would expect the Labor Day inclusive data to miss the mark. Thus, we wouldn’t suggest believing in this week’s reported data too much.

At 10:30 AM EDT, look for the EIA’s latest Petroleum Status Report. Last week’s data covering the period ending August 31st, showed a draw of 7.4 million barrels of crude oil. It’s a trend that has continued for at least a month now, but crude oil inventory is still reported near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.3 million barrels last week, and were in the lower half of the average range for this time of year.

Morgan Stanley’s health conference features Amgen (Nasdaq: AMGN), Agilent Technologies (NYSE: A) and Boston Scientific (NYSE: BSX). Time Warner (NYSE: TWX), CBS (NYSE: CBS), Dell (Nasdaq: DELL) and Qualcomm (Nasdaq: QCOM) will each present at various other conferences. Moody’s (NYSE: MCO), NiSource (NYSE: NI) and Darling International (NYSE: DAR) meet with analysts Wednesday. The earnings schedule has reports from National Technical Systems (Nasdaq: NTSC), Nevada Gold & Casinos (AMEX: UWN), Pall (NYSE: PLL), PMFG, Inc. (Nasdaq: PMFG), Point360 (Nasdaq: PTSX), Spartech (NYSE: SEH), Streamline Health Solutions (Nasdaq: STRM) and TRC Companies (NYSE: TRR).

Thursday
Thursday’s announcement from the Federal Reserve is scheduled for 12:30 PM EDT. At 2:00 PM, the FOMC will release its forecast, and at 2:15 PM, Fed Chairman Bernanke will hold his press conference. Expectations are at least partially built in for an FOMC action like the launch of QE3 or better. Thus, any non-action leaves stocks hanging high and falling fast. A market “high” might last for a bit, but I do not expect it to be too long before economic data piles on the wall of worry, with a peak focused on the fiscal cliff. You might get some insight into what Bernanke will say when Fed Governor Raskin speaks at 1:45 PM in Philadelphia.

The regular Weekly Initial Jobless Claims Report is up for 8:30 AM EDT. Last week’s report pegged claims at 365K, but it was too tightly wrapped around the Labor Day holiday to be meaningful. The monthly Jobs Report confirmed that the economic situation is far from friendly. Economists see claims rising to 370K this week.

The Producer Price Index (PPI) is scheduled for 8:30 release as well, but without the hoopla. Inflation has not been an issue or a near-term concern for most, and certainly has no basis in any of the latest relative data. That said, I am one of the leading voices expressing concern about inflation, which I see as an eventual consequence of central bank actions and unforeseen events (except by me). Economists are looking for a headline PPI rise of 1.4% month-to-month in August, after it inched higher by 0.3% in July. Obviously, the increase will be on energy and agriculture. Thus, the expectation for the Core PPI is for a much more modest increase of just 0.2%. That would follow July’s increase of 0.4% at the core.

Bloomberg’s Consumer Comfort Index, the weekly measure of the consumer mood, is set for its usual 9:45 AM release. This economic data point has deteriorated significantly over recent weeks, excluding the last two periods. It remains in rough territory at negative 46.5, marking its fifth consecutive week of discontent.

The EIA reports on Natural Gas Inventory at 10:30 AM as usual Thursday. Last week’s report for the period ending August 31st showed a net increase of 28 Bcf into storage. That placed gas stores at 329 Bcf above the five-year average.

The monthly Treasury Budget covering the month of August will be reported at 2:00 PM. Expectations are for a deficit of $160 billion, following the deficit of $69.6 billion in July. The range of economists' expectations for August spans from -$175 billion to -$155 billion.

Fashion Week officially starts in New York City.

G-20 finance ministers are gathering in Mexico.

American Express (NYSE: AXP), NVIDIA (Nasdaq: NVDA) and International Paper (NYSE: IP) are addressing investors at various conferences. The day’s earnings schedule has news from Analogic (Nasdaq: ALOG), China Finance Online (Nasdaq: JRJC), Cohen & Steers (NYSE: CNS), Gentium (Nasdaq: GENT), K12 (NYSE: LRN), Lakeland Industries (Nasdaq: LAKE) and Pier 1 Imports (NYSE: PIR).

Friday
We’ll catch no break Friday, with five economic reports on the slate. If the data is sour enough, it could throw water on the Fed’s fire, assuming the Fed sets one. The first big report will be the Retail Sales Report for the month of August, due at 8:30. 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 at 8:30 AM 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, due for report at 9:15, 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 at 9:55 AM. 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 at 10:00 AM, 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.

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

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).

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