What’s Driving the Market this Week – The Fed, Scots & Fiscal Calendar
This week three factors weigh heavily. I dispelled fear of Fed action in my article Market Manipulation? Fed Fear Unfounded, but it appears many have not read the report. It’s okay, as it seems to set up an opportunity for gain, if not just for the manipulating forces, then for my followers too. The Scottish referendum worries me, because as Scotland pulls away with all those tax dollars today paid into UK coffers, and with public service worker benefits and other corporate ties at stake, there’s too much uncertainty about the impact to the important U.K. market and broader ties. Finally, the fiscal calendar of many institutional investors is closing this month, if not in August or October. I think this is driving some selling in the big winners of the last year, because not everyone cares about having a Tesla (Nasdaq: TSLA) show up in its statement of holdings. You know, managers can always mention the names in their annual letters instead and safeguard some profits today.
Also see our report: Gold – Waiting on a Russian Rebuttal to the EU
Stocks have enjoyed quite the run this year, as is evident in the chart here. However, the approaching change in Fed direction weighs on the heights reached here, as the cost of capital will increase for growth names in the S&P 500 and the Russell 2000. The Scottish referendum carries with it scary repercussions for the Brits and too much disruption for the rest of us, so pray for a “No” vote victory here and an intact United Kingdom. Too many gains are at stake as institutional managers look to close their books for the fiscal year. This latest selling in last year’s winners might continue through the month and maybe next as well.
This week’s economic report schedule is full, however inconsequential to stocks. We’ve got our share of manufacturing data, housing reports, pricing measures and broader trade and economic growth barometers. Obviously, most important of all is the FOMC Monetary Policy release and the Fed forecasts, which unfortunately include the Fed Funds Rate forecast. They will serve to remind profit-rich investors of the end of free money coming.
On the manufacturing end, industrial production data was reported Monday, and showed a slight moderation and important miss against economists’ expectations. However, the Empire State Manufacturing Survey, which is regional, gained sharply. Later in the week, we’ll receive data from the Philly Fed as well.
Pricing measures weigh somewhat heavily this week, with both the Producer and Consumer Price Indices due. Also, the Atlanta Fed’s Business Inflation Expectations Index is published later this week. The Producer Price Index is expected to offer no sign of inflation, but the Core CPI measure is expected to post a 0.2% increase, which is borderline-worrisome but not quite there yet. I do not expect these measures to affect the Fed’s monetary policy release Wednesday.
Real Estate enthusiasts have the Housing Market Index, which measures homebuilder sentiment, and the Housing Starts data to look forward to this week along with the regular mortgage data. Homebuilders are expected to sing a better tune, with the HMI seen inching higher. Housing Starts are expected to ease off last month’s annual pace gains, but permit activity will remain steady, offering a solid note for stability moving forward.
The broader measures of the economy are lead by the Leading Economic Indicators (LEI) report, due Friday. Economists see the latest report showing a slower pace of economic expansion than in the most recent reporting, and this is consistent with other economic data which have shown some moderation of late. I would not be surprised if the LEI data comes in lighter than expected or if the prior month is revised lower.
The earnings schedule is light as we approach the end of the third quarter. Still, we have some education names to look forward to and several significant tech names, including Oracle, Adobe and Red Hat. For those of you looking for broader takeaways, you can keep track of FedEx this week and Herman Miller for signs of business spending and general economic expansion. Rite Aid will go bankrupt; you heard it here, and I don’t care how much Cramer loves this name. I visit the stores, and Rite Aid is the next RadioShack, unless it sells out to a stronger competitor.
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.
Also see our report: Gold – Waiting on a Russian Rebuttal to the EU
Stocks have enjoyed quite the run this year, as is evident in the chart here. However, the approaching change in Fed direction weighs on the heights reached here, as the cost of capital will increase for growth names in the S&P 500 and the Russell 2000. The Scottish referendum carries with it scary repercussions for the Brits and too much disruption for the rest of us, so pray for a “No” vote victory here and an intact United Kingdom. Too many gains are at stake as institutional managers look to close their books for the fiscal year. This latest selling in last year’s winners might continue through the month and maybe next as well.
Security
|
YTD
|
TTM
|
SPDR S&P 500 (NYSE: SPY)
|
+7.7%
|
+17.5%
|
SPDR Dow Jones (NYSE: DIA)
|
+2.9%
|
+10.8%
|
PowerShares QQQ (Nasdaq: QQQ)
|
+11.9%
|
+26.1%
|
iPath S&P 500 VIX ST Ft (NYSE: VXX)
|
-31%
|
-49%
|
PIMCO Total Return (NYSE: BOND)
|
+3.7%
|
+4.2%
|
PowerShares DB US $ Bull (NYSE: UUP)
|
+4.2%
|
+2.0%
|
SPDR Gold Shares (NYSE: GLD)
|
+2.2%
|
-7.2%
|
iPath S&P Crude Oil (NYSE: OIL)
|
-2.5%
|
-12.1%
|
Week Ahead
The Economic ReportsThis week’s economic report schedule is full, however inconsequential to stocks. We’ve got our share of manufacturing data, housing reports, pricing measures and broader trade and economic growth barometers. Obviously, most important of all is the FOMC Monetary Policy release and the Fed forecasts, which unfortunately include the Fed Funds Rate forecast. They will serve to remind profit-rich investors of the end of free money coming.
On the manufacturing end, industrial production data was reported Monday, and showed a slight moderation and important miss against economists’ expectations. However, the Empire State Manufacturing Survey, which is regional, gained sharply. Later in the week, we’ll receive data from the Philly Fed as well.
Pricing measures weigh somewhat heavily this week, with both the Producer and Consumer Price Indices due. Also, the Atlanta Fed’s Business Inflation Expectations Index is published later this week. The Producer Price Index is expected to offer no sign of inflation, but the Core CPI measure is expected to post a 0.2% increase, which is borderline-worrisome but not quite there yet. I do not expect these measures to affect the Fed’s monetary policy release Wednesday.
Real Estate enthusiasts have the Housing Market Index, which measures homebuilder sentiment, and the Housing Starts data to look forward to this week along with the regular mortgage data. Homebuilders are expected to sing a better tune, with the HMI seen inching higher. Housing Starts are expected to ease off last month’s annual pace gains, but permit activity will remain steady, offering a solid note for stability moving forward.
The broader measures of the economy are lead by the Leading Economic Indicators (LEI) report, due Friday. Economists see the latest report showing a slower pace of economic expansion than in the most recent reporting, and this is consistent with other economic data which have shown some moderation of late. I would not be surprised if the LEI data comes in lighter than expected or if the prior month is revised lower.
THIS WEEK’S ECONOMIC REPORT
SCHEDULE
|
|
||
Economic Data Point
|
Prior
|
Exp.
|
Actual
|
MONDAY
|
|
|
|
14.69
|
15.9
|
27.54
|
|
0.2%
|
0.3%
|
-0.1%
|
|
-Capacity Utilization
|
79.1%
|
79.3%
|
78.8%
|
0.7%
|
0.1%
|
-0.4%
|
|
TUESDAY
|
|
|
|
Congress Begins ISIS Discussion
|
|
|
|
|
|
|
|
0.7%
|
|
|
|
-Year-to-Year Pace
|
4.0%
|
|
|
4.9%
|
|
|
|
0.1%
|
0.0%
|
|
|
-Core PPI
|
0.2%
|
0.1%
|
|
|
|
|
|
WEDNESDAY
|
|
|
|
-$111.2 B
|
-$114.0 B
|
|
|
-7.2%
|
|
|
|
0.1%
|
0.0%
|
|
|
-Core CPI
|
0.1%
|
0.2%
|
|
55
|
56
|
|
|
|
|
|
|
-Crude Oil Inventory
|
-1.0 MB
|
|
|
-Gasoline Inventory
|
+2.4 MB
|
|
|
|
|
|
|
-FOMC Forecasts
|
|
|
|
-Chairwoman’s Press Conference
|
|
|
|
THURSDAY
|
|
|
|
1.093
|
1.038
|
|
|
-Permits
|
1.052
|
1.055
|
|
315K
|
305K
|
|
|
92 bcf
|
|
|
|
28.0
|
23.0
|
|
|
|
|
|
|
FRIDAY
|
|
|
|
0.9%
|
0.4%
|
|
|
|
|
|
The earnings schedule is light as we approach the end of the third quarter. Still, we have some education names to look forward to and several significant tech names, including Oracle, Adobe and Red Hat. For those of you looking for broader takeaways, you can keep track of FedEx this week and Herman Miller for signs of business spending and general economic expansion. Rite Aid will go bankrupt; you heard it here, and I don’t care how much Cramer loves this name. I visit the stores, and Rite Aid is the next RadioShack, unless it sells out to a stronger competitor.
EPS REPORTS
|
|
Company
|
Ticker
|
MONDAY
|
|
Analogic
|
Nasdaq: ALOG
|
Allied Capital Financial
|
NYSE: AFC
|
Biota Pharmaceuticals
|
Nasdaq: BOTA
|
Corinthian Colleges
|
Nasdaq: COCO
|
Doral Financial
|
NYSE: DRL
|
Education Management
|
Nasdaq: EDMC
|
Fabrinet
|
NYSE: FN
|
ITT Educational
|
NYSE: ESI
|
Majesco Entertainment
|
Nasdaq: COOL
|
NAPCO Security Technologies
|
Nasdaq: NSSC
|
UniTek Global Services
|
Nasdaq: UNTK
|
TUESDAY
|
|
Adobe Systems
|
Nasdaq: ADBE
|
Apogee Enterprises
|
Nasdaq: APOG
|
FactSet Research Systems
|
NYSE: FDS
|
Phibro Animal Health
|
Nasdaq: PAHC
|
WEDNESDAY
|
|
Cintas
|
Nasdaq: CTAS
|
CLARCOR
|
NYSE: CLC
|
Cracker Barrel Old Country
|
Nasdaq: CBRL
|
FedEx
|
NYSE: FDX
|
General Mills
|
NYSE: GIS
|
Herman Miller
|
Nasdaq: MLHR
|
Lennar
|
NYSE: LEN
|
Pier 1 Imports
|
NYSE: PIR
|
Scholastic
|
Nasdaq: SCHL
|
United Natural Foods
|
Nasdaq: UNFI
|
THURSDAY
|
|
ConAgra Foods
|
NYSE: CAG
|
IHS Inc.
|
NYSE: IHS
|
Marcus Corp.
|
NYSE: MCS
|
Oracle
|
Nasdaq: ORCL
|
Red Hat
|
NYSE: RHT
|
Rite Aid
|
NYSE: RAD
|
Rosetta Genomics
|
Nasdaq: ROSG
|
TIBCO Software
|
Nasdaq: TIBX
|
FRIDAY
|
|
NO REPORTS IN US
|
|
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.
Labels: Market-Outlook, Market-Outlook-2014-Q3, Week-Ahead, Week-Ahead-2014
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