The Week Ahead: Not Looking Good

 | Apr 08, 2013 | 6:00 AM EDT  | Comments
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jpm

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cree

Last week saw questions raised, once again, about the strength of the U.S. economic recovery. The order drop in the Institute for Supply Management manufacturing index, and the bad March employment report, served as counterweight to strengthening February construction spending and March's highest-volume figures for auto and truck sales since August 2007. My key takeaways from the employment report were that, not only did the labor force shrink again, but the participation rate is at multiyear lows. That's not good news for the consumer and those industries that rely on them, such as restaurants and retail. Even looking outside the U.S., the latest figures point to a depressed European economy, while those for China point to a modest improvement in March. 

We also remain at the whim of any potential sequestration impact; gas prices that remain high vs. the prior year (though on the decline); and the stock-market indices are near record levels. All of this this tells me that the upcoming wave of corporate earnings will be key. While the season officially starts after Monday's market close, when Alcoa (AA) is set to report its first quarter, it seems the season is already off to a questionable start. 86 companies have issued negative earnings-per-share guidance against only 24 with positive forward figures, according to Friday's data from FactSet (PDF). It's not a favorable ratio, that's for sure. 

With little economic news to kick-start the trading week ahead, all eyes will be on Alcoa's outlook. I continue to see the rebound in housing as being one of the economy's key drivers this year, but I'll be listening to Alcoa to get a view on what they see that's good, bad or indifferent. The data flow will heat up later this week with minutes from the Federal Open Market Committee's March meeting, as well as retail sales ex-gas and auto-and-truck buys. Based on what we saw last week, odds are the Federal Reserve will reiterate its current policy stance. We'll also get the latest view on inflation Friday with the March producer price index. 

With savings rates below 3% for the second month in February, and given the fall-off in retail jobs during March, it's not looking good. Even the latest from the National Restaurant Association's March survey is far less upbeat than it was just a few months earlier, with only 25% of restaurant operators saying they expect economic conditions to improve in the next six months. Needless to say, I remain bearish on casual dining and names like Cheesecake Factory (CAKE), Red Robin Gourmet (RRGB) and Darden (DRI).

While this week officially starts off first-quarter earnings season, it will be slow out of the gate early in the week. But we will certainly see some heavy hitters later on: JPMorgan Chase (JPM) and Wells Fargo (WFC) are the financial names to watch this week, with Bed Bath & Beyond (BBBY), CarMax (KMX) and Pier 1 (PIR) on the consumer/retail front. One other notable to watch will be SemiLEDS (LEDS) after the strong run in shares of Cree (CREE), a fellow LED outfit.

Here's a more comprehensive look at what will be coming your way this week:

__________________

Economic Calendar

Monday, April 8

  • (No major economic releases)

____

Tuesday, April 9

  • Wholesale Inventories (February)

____

Wednesday, April 10

  • Mortgage Bankers Association Mortgage Index (Weekly)
  • Treasury Budget (March)
  • Federal Open Market Committee Minutes (March 20)

____

Thursday, April 11

  • Initial and Continuing Jobless Claims (Weekly)
  • Import and Export Prices (March)

____

Friday, April 12

  • Retail Sales (March)
  • Producer Price Index (March)
  • Michigan Sentiment Index (April)
  • Business Inventories (February)

 

___________________

Corporate Earnings

Monday, April 8

  • Alcoa Inc. (AA)

____

Tuesday, April 9

____

Wednesday, April 10

  • Adtran (ADTN)
  • Bed Bath & Beyond (BBBY)
  • Fastenal (FAST)
  • Family Dollar Store (FDO)
  • CarMax (KMX)
  • PriceSmart (PSMT)
  • Ruby Tuesday (RT)
  • Constellation Brands (STZ)

____

Thursday, April 11

  • Apogee Enterprises (APOG)
  • SemiLEDs Corp. (LEDS)
  • Pier 1 Imports (PIR)
  • Rite Aid Corp. (RAD)

____

Friday, April 12

  • JPMorgan Chase (JPM)
  • Shaw Communications (SJR)
  • Wells Fargo & Company (WFC)

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