Last week was uneventful. The market closed slightly lower for the week. All of the trading opportunities were from earnings surprises.And there were some great ones there, with Groupon rocketing 25% and Priceline up $50 at one point.
This week’s calendar heats up later in the week with economic news. Earnings season is winding down. The week will start off slow but volume should pick up with a slew of economic indicators Thursday capped off by Friday’s option expiration.
Monday August 12th
US. Monthly budget balance statement. The delta of the U.S. budget deficit has been declining. I don’t expect this number to generate much debate but it will be of interest to see how much the market pays attention to this. Let’s call it a warm up act.
The Bank of Japan meets. Lots of hedge funds are watching this as much money was made earlier in the year long Japan.
Tuesday August 13th
German and United Kindom Producer Price Indices. Notable only for the fact the German elections are forthcoming. Europe’s dirty laundry seems like it can always poke through at the most inaapropriate times. Still I think this is a non-event for most American-centric investors.
Later that day a variety of retail sales data will be released. Analysts will be looking to see if last week’s teen retailer weakness extends to the general economy. My guess is that it doesn’t. Teens are just not spending money the way their parents continue to do. This is the “broke” generation compared to previous ones. Nothing too meaningful here. The economy is plodding along propelled by rising house and stock market prices.
Wednesday August 14th
Big news out of Europe. Very few U.S. market participants will care. Most investors are exhausted by the European kabuki dance. That alone might be a promising contrarian indicator. French and German gross domestic product numbers are released, followed up by Bank of England minutes. Euro Zone gross domestic product also is released. This could be impetus for a further rally of the U.S multinationals if Europe looks like its coming out of its near permanent slump.
Back to the U.S., we will have MBA mortgage informatin which I will pay attention to see the pulse of housing. We recently initiated a large position in Pulte , a national homebuilder, which has been a very poor performer this year. We blogged on this last week at
Producer price index numbers have potential to roil the bond market. The premise that the Fed can keep rates abnormally low resides mainly on the belief they have inflation in check. Anyhing that unseats this faith can unnerve the bond market and consequently the stock market as it has one eye now permanently affixed to the 10 yr Treasury.
Earnings plays- I’d be short Deere before Wednesday’s open or at least I’d be nervous about being long. Low U.S crop prices this year and a slow down in Europe and China might way on Deere’s earnings.
| Deere | DE | 2.16 | 1.98 | 9235.56 |
Then again Cisco, a cheap stock on many measures may provide some tech strength when it reports after the close Wednesday.
| Cisco Systems | CSCO | 0.51 | 0.47 | 12411.46 |
Thursday August 15th
This is going to be an intense day. It starts out with Empire manufacturing and rolls into Consumer Price Index. The biggest black swan in the closet is a sudden and unexpected surge in inflation. I am expecting this as eventually rising asset prices like home prices and stock indices have to lead to a pick up in inflation. If this Fed policy of near zero interest rates and quantataitive easing, can lead to increasing wealth effect without raising inflation expectations, I have only one question. Why hasn’t the Government following this policy since forever. If you think that we have found a free lunch, thing again. There is no such thing.
Initial jobless claims and continuing claims are due out Thursday too. This will be closely watched for more evidence that tapering will start as expected in September. Industrial production numbers and the Philadelphia Fed numbers will provide more evidence of whether the economy is slowing or expanding. Economists are divided.
The largest retailer in the world reports after the close on Thursday. Walmart might help to illuminate the lopsided nature of this recovery. The economic divide between the halves and halve nots has never been greater . I expect Walmart to report that people living between paychecks are struggling. Even though the stock is fundamentally undervalued, I wouldn’t go long as earnings could be crimped.
| Wal-Mart | WMT | 1.25 | 1.18 | 118371.98 |
Friday August 17th
Nothing is due out on economic indicators but Friday is the 3rd Friday of the month and option expiration.
We are short many puts and I’ll be relieved if they expire worthless because September is shaping up to be a scary month. Not only will the market be on edge about the Fed’s Hamlet-like “to taper or not taper” indecisiveness, its very likely that our politicians will bring us to the political precipice as well. The Government is reported to run out of money in September and will need to extend the debt ceiling.
My guess is this is the calm before the storm.