INSIGHTS
OCT
15
WEEK AHEAD...
Before we go into this week’s calendar and thoughts we need to establish something very important. We were wrong on our optimistic outlook for the week. Earnings did not impress anyone including us. We expected that this earnings season would be one where more companies would beat the street estimates. Although only 6% of the S&P 500 stocks reported, only 59% of those companies beat expectations. The average has been around two thirds of the reporting companies top their estimates. The market acted accordingly.
We may be too stubborn here but we still believe that earnings will perk up. This week has a full slate of earnings, ranging from General Electric (GE), Citigroup (C), Goldman Sachs (GS), to Microsoft (MSFT), Google (GOOG) and Intel (INTC). Throw in the true bell-weather Blue Chip IBM (IBM) and you can see how important this week will be in the earnings season.
As for what we will be watching, it will be varied. Monday brings us Retail Sales and the Empire State Index. Retail has not been a bright spot in this slow, grinding recovery and I don’t expect that to change this month either. People are spending money as if they are still in some sort of recessionary bunker and for any recovery to fully take hold; these numbers need to show a healthy rise for several months in a row. With consumer confidence beginning to look better, we should see some improvement here. It could be possible that there has been a seismic shift on the way people spend their money and these numbers may not recover for years but we haven’t seen any reports that can verify this.
As we have said in previous posts, The Empire State Index is relatively useless.
Housing numbers will be out Tuesday and Wednesday and we do expect these numbers to be good and getting better. Consumer Price Index will be released on Tuesday as well and once again we make the case that inflation is still way under control because of unemployment and nothing else. Wage pressure is the strongest element of inflation and there isn’t any sign of that happening yet.
One data point that we do think is significant and we feel it will be better than the consensus is the Conference Board’s Leading Economic Indicators. It comes out on Thursday and should help the market strengthen.
Now to Politics: The Debate on Tuesday at Hofstra University should be an interesting event. It’s in a town meeting format. We don’t believe either candidate gives off an aura of causality and informality that an event like this requires so it should be fun watching both candidates tackle the questions from regular people. We can see both candidates coming away from this looking like politicians. Which, in fact, they are.
We may be too stubborn here but we still believe that earnings will perk up. This week has a full slate of earnings, ranging from General Electric (GE), Citigroup (C), Goldman Sachs (GS), to Microsoft (MSFT), Google (GOOG) and Intel (INTC). Throw in the true bell-weather Blue Chip IBM (IBM) and you can see how important this week will be in the earnings season.
As for what we will be watching, it will be varied. Monday brings us Retail Sales and the Empire State Index. Retail has not been a bright spot in this slow, grinding recovery and I don’t expect that to change this month either. People are spending money as if they are still in some sort of recessionary bunker and for any recovery to fully take hold; these numbers need to show a healthy rise for several months in a row. With consumer confidence beginning to look better, we should see some improvement here. It could be possible that there has been a seismic shift on the way people spend their money and these numbers may not recover for years but we haven’t seen any reports that can verify this.
As we have said in previous posts, The Empire State Index is relatively useless.
Housing numbers will be out Tuesday and Wednesday and we do expect these numbers to be good and getting better. Consumer Price Index will be released on Tuesday as well and once again we make the case that inflation is still way under control because of unemployment and nothing else. Wage pressure is the strongest element of inflation and there isn’t any sign of that happening yet.
One data point that we do think is significant and we feel it will be better than the consensus is the Conference Board’s Leading Economic Indicators. It comes out on Thursday and should help the market strengthen.
Now to Politics: The Debate on Tuesday at Hofstra University should be an interesting event. It’s in a town meeting format. We don’t believe either candidate gives off an aura of causality and informality that an event like this requires so it should be fun watching both candidates tackle the questions from regular people. We can see both candidates coming away from this looking like politicians. Which, in fact, they are.