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Monday, October 08, 2012

Week Ahead – Earnings Season and Warnings Key

week ahead
It’s likely to be a week driven by earnings, with the informal kickoff of the season by Alcoa Tuesday. The week closes with news from major banks J.P. Morgan and Wells Fargo, but is somewhat sparse of data in between. Even the economic slate is light, though some interesting news will emanate from small businessmen, OPEC and the usual monthly and weekly releases. Earnings warnings, both present and forward looking, may end up driving the direction of the market, given the still young season. The first of these could come with Yum! Brands’ (NYSE: YUM) release on Tuesday.

Monday
The stock market is open on Columbus Day, but bond markets and banks are closed for the holiday. Wal-Mart (WMT) and American Express (AXP) have an announcement scheduled with regard to a joint prepaid card. AngioDynamics (Nasdaq: ANGO) is scheduled to report earnings.

Tuesday
Alcoa (NYSE: AA) formally kicks off corporate earnings reporting season for the September quarter.

We’ll hear from the National Federation of Independent Business (NFIB) as it publishes its Small Business Optimism Index in the premarket. The index rose by 1.7 points in August to a mark of 92.9. However, at the current level, small businessmen continue to express caution with regard to expansion plans. Economists see the measure improving further for September to a reading of 93.3, but it should not move decidedly in one direction or another until after the election, barring any unforeseen event catalyst.

European Central Bank (ECB) President Mario Draghi is scheduled to speak in a public hearing at the European Parliament. When Draghi speaks these days, people listen, thus so should you as he could drive shares Tuesday. Any news of the ECB actually buying sovereign debt should be constructive.

The International Council of Shopping Centers (ICSC) reports on retailers weekly chain store sales in the premarket. Last week’s data covering the week ending September 29 showed same-store sales declined by 0.3% week-to-week. It’s still tough measuring, given the holidays that ran through the compared periods. Though, on a year-over-year basis, sales only increased 2.4%, which is barely more than the rate of inflation. We’ve been unenthused about the consumer spending trend, in fact, calling attention to anomalies affecting consumer confidence and spending.

FDIC regulators will cement a new rule structure requiring banks with assets upward of $10 billion to undergo monthly stress testing. It will be interesting to see if the ruling weighs on or gives life to the shares of major banks.

A Deutsche Bank (NYSE: DB) Leveraged Finance Conference kicks off in Scottsdale, Arizona. Verastem (Nasdaq: VSTM) presents at the BIO Investor Forum. Presenting to analysts and stockholders, find FedEx (NYSE: FDX), Baxter International (NYSE: BAX) and Worthington Industries (NYSE: WOR). The earnings schedule has news from Alcoa (NYSE: AA), Yum! Brands (NYSE: YUM) and Mistras Group (NYSE: MG).

Wednesday
Look for the weekly Mortgage Applications Survey from the Mortgage Bankers Association (MBA) first thing Wednesday morning. Last week’s report covering the period ending September 28 showed that record low mortgage rates were making an impact for housing. The Market Composite Index increased 16.6% over the week just prior. It’ll be interesting to see if there is follow-through this week.

At 10:00 AM EDT, the Census Bureau reports on Wholesale Trade for the month of August. In July, inventories increased by 0.7% against a 0.1% decrease in wholesale sales. This month, economists see inventory up 0.4%, but you’ll want to watch the inventory-to-sales ratio for better understanding of the situation. Wholesale sales should likewise rise for indication of a healthy environment.

Petroleum complex traders will have their eye on the monthly Oil-Market Report published by OPEC Wednesday. Oil prices have declined over the last month and could use some further settling ahead of what is likely a near Iran event. However, OPEC has other interests than the West and so we could see some statement of production support. In my view, it’s questionable what OPEC can promise given the state of affairs across much of the Middle East today, let alone if an event occurs. I’m looking for oil to creep higher this week given the light economic data schedule.

The Federal Reserve publishes its Beige Book of regional economic indicators at 2:00 PM ET. The report might shed further light on the Fed’s latest dovish plans, but in doing so, would likely pressure stocks with worry about the economy. Still, the report is somewhat complex for the media to interpret, and even the views of economists are somewhat muted on the data. So, I wouldn’t expect much action on the news.

Also at 2:00 PM, expect the monthly Treasury Budget for September. While this report might garner the interest of Mitt Romney, as he points out the depths of the deficit, it’s not likely to move stocks. While the budget for August showed a deficit of $190.5 billion, the report for September typically shows a modest surplus. However, in 2011, the government posted a September deficit of $62.8 billion. Economists seem dumbfounded this month, with the consensus stuck at breakeven. However, the range of views extends from a deficit of $2.0 billion to a surplus of $77 billion for the month.

The Bureau of Labor Statistics is scheduled to publish its Job-Openings and Labor-Turnover Survey (JOLTS) for August Wednesday. Of course, the market got its fill of information on the state of labor last week.

Realogy Holding, the largest real estate broker in the country, is expected to price its IPO Wednesday. The Deutsche Bank Levered Finance Conference has presentations scheduled by Sprint Nextel (NYSE: S), Crown Castle International (NYSE: CCI) and Accuride (NYSE: ACW). FedEx (NYSE: FDX) will present to investors and lenders. The earnings slate has news from ADTRAN (Nasdaq: ADTN), AEHR Test Systems (Nasdaq: AEHR), Costco Wholesale (Nasdaq: COST), Helen of Troy (Nasdaq: HELE), Hemispherx Biopharma (NYSE: HEB), Material Sciences (Nasdaq: MASC), OCZ Technology (Nasdaq: OCZ), Richardson Electronics (Nasdaq: RELL), Ruby Tuesday (NYSE: RT) and VOXX International (Nasdaq: VOXX).

Thursday
The stir across America Thursday will be around the Vice Presidential Debate, pitting the often wordy Joe Biden against the strong-willed and worded Paul Ryan.

Weekly Initial Jobless Claims will be reported at 8:30 AM. Last week’s report covering the period ending September 29 showed a jobless claims increase of 4,000, to 367K. The economists’ consensus is set at 370K for this week’s report, but I have little confidence in forecasts in this weekly measure. Likewise, the market focuses on the change week-to-week rather than the variance from forecast.

Also at 8:30, look for the International Trade Report and the latest Import and Export Prices data. Economists expect the international trade deficit expanded in August to $44.0 billion, from $42.0 billion in July. Both exports and imports have been trending lower, reflecting the softening global economy. Both Import and Export Prices are seen increasing month-to-month in September, however, each should still be lower than prior year levels, again reflecting softer economic conditions globally. Economists see export prices rising 0.4% month-to-month, after marking a 0.9% increase in August. Forecasters see import prices equaling the August increase of 0.7%.

The Bloomberg Consumer Comfort Index improved at last check, gaining 2.7 points in its move to negative 36.9. Obviously, the weekly measure is still not reflecting a highly “comfortable” environment, driven by all the usual global macroeconomic and geopolitical suspects.

Federal Reserve Vice Chair Janet Yellen will speak in Tokyo on the Japanese economy and its place in the global economy. Here at home, Federal Reserve Governor Jeremy Stein responds to questions at the Brookings Institute in D.C. St. Louis Fed President James Bullard speaks to the Annual Fall Research Conference at his Bank in the evening.

The EIA will report on both petroleum and distillates inventory levels and also natural gas Thursday. Last week’s Petroleum Status Report covering the period ending September 28 showed crude oil stocks decreased by 0.5 million barrels, leaving stores above the upper limit of the average range for this time of year. Total motor gasoline stocks increased by 0.1 million barrels, leaving it in the lower half of the average range for this time of year. Natural gas inventory increased by 77 Bcf in the period, leaving gas stores 281 Bcf above their five-year average mark.

A New York bankruptcy judge is scheduled to determine whether to allow U.S. regulators to expand their probe of M.F. Global Holdings. Look for the IPO of Direct Line Insurance Group, England’s largest auto insurer. The corporate schedule also has Beazer Homes (NYSE: BZH), Equinix (Nasdaq: EQIX), Gaylord Entertainment (NYSE: RHP) and Health Management Associates (NYSE: HMA) presenting at the Deutsche Bank Levered Finance Conference. Iron Mountain (NYSE: IRM) has its annual investor day. The earnings schedule has reports from API Technologies (Nasdaq: ATNY), Bank of the Ozarks (Nasdaq: OZRK), Bank of South Carolina (Nasdaq: BKSC), Cantel Medical (NYSE: CMN), Emmis Communications (Nasdaq: EMMS), Fastenal (Nasdaq: FAST), J.B. Hunt (Nasdaq: JBHT), Oil-Dri Corp. (NYSE: ODC), Safeway (NYSE: SWY), Winnebago (NYSE: WGO) and Zep (NYSE: ZEP).

Friday
Friday keys on the major earnings reports of J.P. Morgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC), with growth seen from each. While we are on earnings, the rest of the schedule has reports from iGATE (Nasdaq: IGTE), KMG Chemicals (NYSE: KMG) and Webster Financial (NYSE: WBS).

Look for the Producer Price Index (PPI) for September at 8:30 AM ET. Headline PPI is seen by economists increasing by 0.8%, after its 1.7% increase in August. Core PPI, excluding food and energy prices, is expected to rise by 0.2%, matching its rise of August.

The University of Michigan/Reuters Consumer Sentiment Index is set for release at 9:55 AM ET. Economists see the sentiment measure holding steady at 78.3 this time around, after closing September down from a mid-month September read of 79.2.

Get the schedule at your favorite stock market blog weekly.

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