The Greek's Week Ahead has been engineered to provide investors with a comprehensive market-moving event planner to reference all week long.
Investors, businessmen, workers and citizens can all take a collective breath now. After last week's excessive volatility and dramatic decline, the market is seeking value now and someone to believe in. According to European news media, we have Europe to thank for the turn around. However, you know as well as I do, the investment community began looking for value in stocks on Friday afternoon. The market's rise on Monday was more reflective of valuation and a full weekend to contemplate our concerns and opportunities without the intense pressure of real-time trading and real-time stress.
Columbus Day was a working day for most of Wall Street. However, banks and U.S. fixed income markets were closed for the day.
The greater nation returns to work on Tuesday, and will likely find a sketchy ICSC-Goldman Same-Store Sales Report in the early going. Be sure to see up to the minute economic releases at Market Moving News each day, and you can find current data there for this report and others.
Early last week, before the global meltdown had done most of its damage, the International Council of Shopping Centers reported prior week sales rose just 1.3% over the prior year result. The trend here has been one of growth deceleration, and we expect that this will be exacerbated by the wake up call that 401K statements deliver over the weeks ahead. We have no doubt that enough checks of real-time portfolio values took place last week to scare the bejeavers out of consumers. Any wealth effect garnered by past fat 401K balances, is surely going to turn sour now. So, there's all the more reason to expect sales trends to soften through the holiday season, and surely up until early discounting begins. Week-to-week sales increased just 0.1% last week.
The Redbook Survey is also due before the market open on Tuesday. Last week's report showed the rate of growth slowed further, to 0.8% in the week ended October 4th. At 2:00 PM on Tuesday, the Treasury Budget is expected to show a $70 billion surplus in September, versus a $111.9 billion deficit in August. Clearly though, strains on the budget are only increasing.
In Canada, elections are scheduled for the House of Commons. Within the States, the day marks the final opportunity to register for the presidential election in many regions.
The meat of this week's economic reports can be found on Wednesday and Thursday. The regular Mortgage Bankers Association Applications Report hits the wire first. As with spending, mortgage activity is likely to be limited by the aforementioned hit to portfolio values, depending on how long it lasts. Even if stocks recover recent losses completely, there seems little reason to anticipate any sort of significant housing recovery for at least half a year, when a seasonal Spring boost might avail.
Speaking of consumer spending, September's Retail Sales tally is due on Wednesday at 8:30 a.m. ET. If last week's individual Chain Store Sales data were any indication, and they were, September's Retail Sales should be lousy when reported. Bloomberg's consensus is anticipating a month-to-month decrease of 0.6%, or 0.3% excluding autos. It's probably a good idea to exclude autos these days as much as possible...
"The Greek" feels for those of you working in retail, as I anticipate intense pressure will expose a saturated shopping environment now. I expect this will lead to further consolidation, store closures, layoffs and bankruptcies in some cases. Early on, we saw a few weak players exposed (Talbots and Linens 'n Things and others), but now with double digit same-store sales decline, well that's going to leave some more chains out in the cold. Such is the result of overextension.
We get an important ground level inflation metric at 8:30 also, the Producer Price Index for September. Energy prices fell sharply in September, and so, the headline PPI is seen declining 0.4%. Core PPI, excluding food and energy, is expected to have risen 0.2% month-to-month. Core prices increased 0.2% in August as well, but we've experienced great drop in commodity prices as global demand has softened. Thus, the outlook here is much less concerning than only a few months ago, just as Bernanke expected.
The Empire State Manufacturing Index, measuring conditions in the New York region, is forecast to show a negative 10.5 result, versus negative 7.4 in September. As poor as this measure already is, as global demand slips, this and related manufacturing data should deteriorate significantly. A sub-zero number identifies economic contraction.
At 10:30 AM, look for the reporting of Business Inventories for the month of August. Bloomberg's consensus of economists forecasts inventories rose 0.5%. August Wholesale Trade Inventories were reported last week piling up a bit, up 0.8%. Despite these days of more efficient inventory management, it appears demand is drying up quickly enough to allow for some inventory build anyway.
The EIA's take on Petroleum Inventory has been reported building over the past couple weeks. OPEC is starting to feel the heat of prices nearly cut in half since July. A special meeting is expected in November, where production adjustment seems likely. Oil looks to have found some footing since government intervention to stabilize global economic conditions.
In the afternoon, the Federal Reserve releases its Beige Book, a regional take on economic activity. It seems clear that this report can do little damage on the downside, but can surprise on the upside. That's a condition that is conducive to eventual stock recovery. Wednesday evening brings the third and final presidential debate, this time at Hofstra University. The candidates have begun extending themselves, and Barack Obama's foreclosure freeze plan, while a populist plea, makes him vulnerable if addressed properly. I view this as a clearly dangerous replication of Hillary Clinton's pitch on the subject. McCain produced a counter plan this week. To be completely fair, his may not be any better, but we'll check it out for you.
Thursday offers a couple key reports, including CPI and Initial Jobless Claims, both in the pre-market. Jobless Claims improved slightly last week, but the four-week moving average deteriorated further. Many economists and media outlets have been mucking up the picture in recent weeks by placing jobless data blame on hurricane activity. While we're sure there's been some effect, it's clear why claims are running high on base. There's no need to muck up the picture with noise like that. Bloomberg's consensus is forecasting a figure of 475K new benefits filers this week, versus 478K last week.
The Consumer Price Index for September should show a 0.1% headline rise, and 0.2% core increase, according to Bloomberg's consensus tally. Core prices increased 0.2% last month as well. We expect prices to stick hot a while, as stubborn profit-preservation efforts persist on the corporate level. Bernanke recently spoke of some embedding of inflation that he believes has occurred, and this is partly evident here. In Europe, you'll find more of it thanks to higher inflation and union strength under socialist citizenry expectations.
Industrial Production for September, due at 9:15 ET, is seen up 0.8%. However, capacity utilization is expected to have deteriorated to 77.9%, from 78.7%. Capacity utilization has trended lower for some time now, and measured at 81.5% in January. As less capacity is utilized, more and more employers consider layoffs. Average hours worked has also been on the decline.
A day after the similar New York manufacturing metric, the Philly Fed Survey is set for 10:00 AM release. According to Bloomberg, October should measure negative 10.0, versus September's level of +3.8. August's Treasury International Capital Report is due at 10:00 also, and should show a flow out of riskier U.S. assets, likely offset by flow into Treasuries; we'll certainly see that in October's data. July posted a net increase of international capital of $6.1 billion.
The EIA's Natural Gas Report is set for 10:30 release. Natural Gas, in case you have not been paying attention, has decreased in cost along with crude. By my eyeball, the premium of crude to natural gas that is counter to historic trading, still seems evident. I believe much of this premium is the result of the sources of the energy resources, and a loss of confidence in the stability of foreign based sources of crude; also, concern over a tighter demand/supply balance in crude plays a role. At 1:00 PM ET, the National Association of Home Builders offers its Housing Market Index for October. The September take on this figure was 18, versus 19 in January.
September's Housing Starts are due at 8:30. The economist consensus forecasts housing starts ran at an annual pace of 880K in September, down from 895K in August and 1.012 million in January. University of Michigan Consumer Sentiment is seen falling to 66.0, from 73.1 in September.