We cannot approach the week ahead without acknowledging the impact of the week just passed. There is no getting around it. The U.S. Federal Reserve raised the Fed Funds Rate and kept its forecasts hawkish despite the stagflation obstacle some investors saw. But it is an illusion; inflation is only missing in action, and I believe on its way. So take your bitter medicine Mr. Market, and like it, because it is necessary. The Fed's positioning and the uncertainty about the U.S. economy should keep a lid on the market for now. The ongoing investigation of the President and the sluggish progress of key cogs of his agenda (tax reform) add drag as well, though if we get progress, the line will be cut for the market to race higher. We're just not there yet, but we do have rising geopolitical tensions and a Special Counsel investigation to digest daily. And with the long days of summer ahead of us, stocks may have marked highs we will not see again for a while. <\/p>\n
The SPDR S&P 500 (NYSE: SPY) closed the busy news week down 0.3%, though stocks might have reacted more violently considering everything that happened. The SPDR Dow Jones (NYSE: DIA) gained by 0.4%; the PowerShares QQQ (NASDAQ: QQQ) declined by 1.3%; and the iShares Russell 2000 (NYSE: IWM) dropped by 1.0%. The PowerShares DB US Dollar Bull (NYSE: UUP) fell by 0.1%; the United States Oil (NYSE: USO) fell by 2.6%; the SPDR Gold Trust (NYSE: GLD) dropped by 1.0% and the PIMCO Active Bond Exchange Fund (NYSE: BOND) gained by 0.3%. <\/p>\n
In the week ahead, you can bet your bottom dollar the investigation of Russia's election meddling and now the President of the United States as well, according to his tweet, will key the start of the week with tension. But as we progress, the market will take its lead from relevant developments. So let's examine the economic schedule for starters. <\/p>\n
The Economic Schedule <\/p>\n
As always, the week following an FOMC Policy Meeting presents a parade of Federal Reserve officials. The schedule of speakers will therefore offer more color on Fed thinking. It could drive some volatility in the week ahead but I wouldn't count on it with the FOMC clearly expressing itself just a few days ago. More importantly, economic data will now be looked to to justify the Fed perspective. <\/p>\n
On Monday, we will hear from New York Federal Reserve Bank President William Dudley in the morning and Chicago Fed Bank President Charles Evans in the evening. There will be no critical data reported in America Monday otherwise, so expect the full focus of investors to be on analyst commentary on the Amazon (NASDAQ: AMZN), Whole Foods Market (NYSE: WFM) deal, the Fed speakers and any developments around the investigation by Special Counsel Mueller. <\/p>\n
Three more Fed speakers highlight Tuesday's schedule, with Federal Reserve Vice Chairman Stanley Fischer and Boston Federal Reserve Bank President Eric Rosengren scheduled to make news before the market open. In the afternoon we will hear from Dallas Federal Reserve Bank President Robert Kaplan. <\/p>\n
The only other data on tap for the day is the Current Account for Q1, due at 8:30 AM EDT. The consensus of economists expect the current account deficit to widen to $121.8 billion, from $112.4 billion in the fourth quarter. <\/p>\n
Tuesday's earnings schedule is very interesting and highlights Adobe Systems (NASDAQ: ADBE), FedEx (NYSE: FDX), HB Fuller (NYSE: FUL), Korn\/Ferry Int'l (NYSE: KFY), La-Z-Boy (NYSE: LZB), Lennar (NYSE: LEN) and Red Hat (NYSE: RHT). Housing industry strength will likely benefit most relative corporate reporters, including possibly builder Lennar, building products supplier HB Fuller and home furniture maker La-Z-Boy. FedEx is also reporting and offers insight into economic health. I'll be keeping my eye on all these firms and likely reporting on at least one of them in the days ahead. <\/p>\n
Wednesday's economic schedule highlights housing data, with Existing Home Sales (NYSE: IYR) due for the month of May. Economists see the annual pace of sales edging lower to 5.55 million in May, down from 5.57 million in April. Existing home sales were up 1.6% year-to-year in April. <\/p>\n
I'm still looking for the housing market to recover in coming months, as it did last year on new seasonal or special effect (seen last 3 years) economists are still trying to understand. April was a relatively poor month and economists are playing it close to the vest here for May with a conservative consensus forecast close to the prior month report. Maybe we'll do better... <\/p>\n
The existing home market makes up the majority of U.S. home sales, but I think a healthy market is characterized by a larger percentage of new home sales to total sales. <\/p>\n
Wednesday's earnings is highlighted by reports from Actuant (NYSE: ATU), Carmax (NYSE: KMX), Cyanotech (NASDAQ: CYAN) and Winnebago Industries (NYSE: WGO). Let's look at Carmax and Winnebago for anecdotal insight into the state of consumer discretionary spending. <\/p>\n
Thursday's data will be led by Leading Economic Indicators, due at 10:00 AM EDT. This report for May is expected by economists to show a 0.3% increase, matching the mark set in April. The consensus range varies one-tenth of a percentage point either way, but this data is critical to investors today, so the slightest swing will move the market. Good news is good news here and justifies the Fed's rate action and still serves stocks; bad news is bad news and hurts us. <\/p>\n
The rest of the day's data is marginally important to market direction and velocity. The FHFA House Price Index will catch some eyes, simply because housing prices are an important component for inflation measures. Economists see a 0.5% increase for April's data reported today. That would mark a slowing from the 0.6% gain seen for March. On a year-to-year basis, prices were up 6.2% in March, and that illustrates how hot home prices have been on lacking supply and an improving economy and job market. <\/p>\n
The Kansas City Fed Manufacturing Index, due this day, is a measure of Midwest manufacturing. Last month, the index marked 8.0; positive readings indicate economic expansion. <\/p>\n
Thursday's earnings schedule highlights the reports of Accenture (NYSE: ACN), Apogee Enterprises (NASDAQ: APOG), Barnes & Noble (NYSE: BKS), Bed Bath & Beyond (NASDAQ: BBBY), Carnival (NYSE: CCL), Commercial Metals (NYSE: CMC), Hain Celestial Group (NASDAQ: HAIN), Methode Electronics (NYSE: MEI), SYNNEX (NYSE: SNX), Sonic (NASDAQ: SONC) and iKang Healthcare (NASDAQ: KANG). Again, my focus will be on consumer discretionary spending indications from Carnival and also possible housing strength benefits at Bed Bath & Beyond. <\/p>\n
Bill Dudley is back on Friday, along with Fed speakers Bullard, Mester and Powell, so things might get interesting to close out the first summer Friday. Don't kid yourself; we are entering the period of light trading volume as money managers (too many anyway) spend their weekends (long ones) watching the markets from the beach - I hear Shelter Island is the place to be from a trader friend I lost several years ago tragically the day after Father's Day. Steve Koufakis, I'll raise a drink to you this weekend, and I'll spill some ouzo for you too. <\/p>\n
As for data, New Home Sales (NYSE: PHM) is due for May at 10:00 AM EDT. Economists expect the annual pace of sales to recover some, rising to 590K after dropping sharply in April to 569K. Oftentimes, on a big move like that, we see revisions the following month, so I would not be surprised to see one here for April. <\/p>\n
A shout out to Philly-based builder Toll Brothers (NYSE: TOL), a close to home company I valued and owned shares of in graduate school (and did well with). I got to meet one of the Toll Brothers and tell him about it not long thereafter. And oh by the way, Toll Brothers was pointing out tightness in its relative labor market years ago at the Emerald Research Groundhog Day Conference. Look for more companies to be doing the same in the months ahead as labor market tightness becomes an endemic problem. It should ignite inflation. <\/p>\n
Markit will be reporting its PMI Composite Flash measure Friday too, with economists looking for it to hold near the prior month level (consensus forecast at 53.8 for June). Manufacturing is seen gaining slightly to 52.6 and Services is seen falling to 53.7, from 54.0. Readings above 50.0 mark economic expansion. <\/p>\n
The earnings schedule includes BlackBerry (NASDAQ: BBRY) and Finish Line (NASDAQ: FINL). <\/p>\n
In conclusion, keep your eye on all of the above, and one eye on the President's Twitter account, as it all matters nowadays for stocks... sad! For more of my musings on the market, follow the column here at Seeking Alpha. <\/p>\n
Disclosure: I\/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. <\/p>\n
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. <\/p>\n
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Original post:<\/p>\n
Week Ahead - Mr. Market Takes His Bitter Medicine - Seeking Alpha<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" We cannot approach the week ahead without acknowledging the impact of the week just passed. There is no getting around it Continue reading