September 12, 2010 A busy week ahead and shopping for retail
We hope you ad a great weekend. The weather here in SoCal was almost picture perfect. It was a great kick off weekend for football season and today I had a round of golf of which I was not ashamed.
This week is a busy week for the market for me personally and professionally. If my posts are brief (I will wait a second for the applause to die down, two, three, four) this week I have good reason.
We have 10 relevant data points to keep an eye on as well as a half a dozen earnings reports this week which might influence the market. Also we have to watch The Obama administration to see if he continues his pro business rhetoric as this could be the kindle for an extension of our two week rally.
!0 data points to watch:
1. Monday the Federal government show us her undies, or balance sheet. There should be no surprises, BUT if there is than well that’s the definition of a surprise. The deficit is expected top grow between 60-80 Billion based upon history. I am guessing a 100 billion climb and if it goes higher than that look for a 1 point drop in the S & P 500. That would equate to about 130 points for the dow. If we stay in the 60-80 B range. There should be no major market play. If we see something less than 50 billion it does not matter because the annual deficit is 1.2 trillion. (Lot of zeros on that one.)
2. Tuesday we have a couple of retail sales report, but keep your eye on The Retail Sales report due out at 8:30 am eastern time. This one is hard to get a read on at the moment as the confidence number is all over the board and the employment figures are murky because of the census positions wrapping up. The consensus is a .3% move up and little more if you throw in autos. Personally look for a lower number like 0 retail growth and .1 with autos. That will take the market down a half a point or about 50 points on the DOW.
3. Tuesday will also give us business inventories. If you remember we had factory order up 1% a while back. The wholesale inventory report was up but sales were down. Here is my thinking if wholesalers inventories are up but sales are down the inventory at business must be up and probably more than the consensus inventory which is pegged at an increase of .6%. Look for at least a full point jump and this will burden the market even further.
4. The Empire State (NY) Manufacturing Index comes out on Wednesday. I have read this Fed index report in the past and can not for the life of me figure why it has such influence other than it is close to home for all the big buck folk in Manhattan. Anyway is an index and as such it has a data range. Last month the index was up to 7.1. The consensus is a drop to 5.0 meaning not as much manufacturing activity is happening in the New York area. I will go with the consensus on this call and won’t spend too much time thinking about it. Hopefully there will be some good stock or global news so we don’t focus on what will be a soft number.
5 Wednesday will also give us the Industrial Production report which has tow components. Those would be the actual industrial production and then the capacity utilization report. With regards to the utilization report, we were hitting number of 84% during the peak of the economy in 07 early 08. Then we fell below 70 during the first and second quarter of 2009. We have edged up to 74 ish of late. I would look for that trend to continue. The consensus is 74.9 and I would say we will beat that by about 1- 1.5%. That will spark the market it back a bit. Let’s say it pulls the market up 1 percent or about 80-90 points on the DOW.
I will get you the other 5 later in the week, but before they happen.
Is It Time To Go Shopping?
If you think that it is time to look for consumer to start stimulating the economy, it is good to get ahead of the curve. We are looking at two retailers that might be good 24-36 month Investments. We are looking at William Sonoma and Target. Yes we used to have Target late 09, made some profit, gave some of it back and then got out when WalMart started cutting prices to the chagrin of most other retailers. Target is looking good again, but because of the confusing balance sheet, we want to read more. Just wanted to give you a teaser and to let you know we might be looking for some cash to get these to fine retail establishments a go.
Who has good news this week.
Monday you have Discover Financial reporting and trying to be the analysts estimates of 32 a share. We are thinking, well I am thinking they will come up short to say 30 cents a share.
Best Buy reports on Tuesday and it is a retail bell weather report. They are looking for 45 cents a share and while their costs have not escalated, WalMart has not backed down their aggressive price against BBY. Look for a slight miss say 43 cents a share. If we are wrong they beat by 3 or 4 sense it will be a good boost to the entire retail sector.
On Thursday FedEx reports and look for a nice beat of the 1.20 a share expectations. That will be a good boost for the economy in general.
At the end of the week, look for the overall market to be down 1.5%. Sorry to close on such a bummer note. And I am going to make it worse by not providing any art tonight. I have to get ready for important meetings over the next couple of days.