Week Ahead – Tapering Revisited

Stocks recovered ground last week on the heels of strong motor vehicle sales data and an enthusing Employment Situation Report. The revision higher of nonfarm payrolls for May and the stronger than expected pace of job growth reported for June reassured investors that the Fed may know what it is doing. We expect the market to question that same issue though this week when the FOMC meeting minutes are released. The release should have some interesting discussion, as the meeting resulted in the formal Fed tapering statement. You will probably want to catch Fed Chairman Bernanke’s speech later that same afternoon, as he will certainly be tested on the subject.

Index ETF	Week Ending July 5	Year-to-Date
SPDR S&P 500 (NYSE: SPY)	+1.6%	+15.2%
SPDR Dow Jones (NYSE: DIA)	+1.7%	+16.6%
PowerShares QQQ (Nasdaq: QQQ)	+1.8%	+11.5%

Economic Events

The week has its share of economic hits. The FOMC Meeting Minutes from the last controversial “tapering” meeting are coming back to haunt us. The Fed’s release should stir stocks, and Ben Bernanke follows that up with a late afternoon speech, which we are sure will include some interesting questions about the Fed’s plans.

We will hear from small businessmen again this week, getting the latest sentiment reading from the heart of American business. Small businesses do the hiring and firing in this country, and so their confidence in the economy is tantamount to its growth.

The now famed Reuters/University of Michigan Sentiment Index is due this week as well, and on Monday Reuters said it would suspend its early release of the data to its customers while that process is being reviewed by regulators. You can expect the event to never again be available on a preferential basis. Retailers will report their monthly chain store sales this week, so we will get a good look at real business activity as well.

Last week’s mortgage activity data showed a significant drop, but we expect holiday noise is now also coming to play. We will see more of that in this and the next reporting period of the Mortgage Bankers Association.

Two key pricing data points reach the wire this week. The Producer Price Index, showing changes for the makers of goods, is important but not as nimble as changes in commodity prices. Import and export prices will also find the wire, so we will get a nice look at the latest inflation data in sum.

Finally, last week showed a deep drop in crude oil inventory, so commodity traders will be closely attuned to the latest news from the EIA on Wednesday. See the entire week’s economic schedule in the table below.

THIS WEEK’S ECONOMIC REPORT SCHEDULE
Economic Data Point	Prior Period	Expected this Period
MONDAY
Consumer Credit	+$11.1 B	+$13.0 B
Investor Movement Index	5.31
TUESDAY
NFIB Small Business Optimism Index	94.4	94.7
ICSC Store Sales	+0.6	NA
WEDNESDAY
FOMC Meeting Minutes
Bernanke Speech
Wholesale Trade (Inventories)	+0.2%	+0.3%
Mortgage Activity	-11.7%	NA
Bloomberg Consumer Comfort	-27.5 (+0.8)	NA
EIA Petroleum Status	-10.3 M Barrels	NA
THURSDAY
Retailers’ Chain Store Sales	NA	NA
Weekly Jobless Claims	343K	K
EIA Natural Gas Report	+72 Bcf	NA
International Trade Prices
-Import Prices	-0.6%	+0.1%
-Export Prices	-0.5%	-0.1%
FRIDAY
Producer Price Index	+0.5%	+0.5%
-Core PPI	+0.1%	+0.2%
Michigan Reuters Consumer Sentiment	84.1	84.1

Corporate Events

It’s the informal start of earnings season, with Alcoa (NYSE: AA) reporting results on Monday afternoon. There will be several other high profile reports, especially in the financial sector, with J.P. Morgan Chase (NYSE: JPM) closing out the week, but for the most part, earnings season is still ahead of us.

HIGHLIGHTED EPS REPORTS
Company	Ticker
MONDAY
Alcoa	NYSE: AA
WD-40	Nasdaq: WDFC
Calpyte Biomedical	Nasdaq: CBMC
Cambridge Heart	Nasdaq: CAMH
Century Bancorp	Nasdaq: CNBKA
China Bak Battery	Nasdaq: CBAK
Flow International	Nasdaq: FLOW
Home Loan Servicing Solutions	Nasdaq: HLSS
iGATE	Nasdaq: IGTE
Mercury Systems	Nasdaq: MRCY
Orchard Supply Hardware	Nasdaq: OSHWQ
SciClone Pharmaceuticals	Nasdaq: SCLN
Vocus	Nasdaq: VOCS
TUESDAY
Tuesday Morning	Nasdaq: TUES
Hi-Tech Pharmacal	Nasdaq: HITK
Magnum Hunter Resources	NYSE: MHR
Wolverine World Wide	NYSE: WWW
Penford	Nasdaq: PENX
Franklin Covey	NYSE: FC
WEDNESDAY
MSC Industrial Direct	NYSE: MSM
Family Dollar	NYSE: FDO
American Greetings	NYSE: AM
Fastenal	Nasdaq: FAST
Texas Industries	NYSE: TXI
THURSDAY
L Brands	NYSE: LTD
Progressive	NYSE: PGR
Bebe Stores	Nasdaq: BEBE
The Gap	NYSE: GPS
Peregrine Pharmaceuticals	Nasdaq: PPHM
FRIDAY
J.P. Morgan Chase	NYSE: JPM
Wells Fargo	NYSE: WFC
Webster Financial	NYSE: WFC
Ocean Power Technologies	Nasdaq: OPTT
Joe’s Jeans	Nasdaq: JOEZ

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