The Week Ahead: Zero In on Spending

 | May 26, 2013 | 5:00 PM EDT  | Comments
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Stock quotes in this article:

tif

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mov

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kors

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cost

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dsw

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bamm

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lgf

Volatility returned to the stock market last week following a pair of economic readings that suggested a new economic contraction in China and a continued one in the eurozone. The flash purchasing managers index for China, in particular, led to a significant pullback in Japan's Nikkei 225 Index -- which nonetheless remains up more than 40% for the year. The reading also reignited global growth concerns.

The U.S. stock market declined following that data, but to a far less degree. In domestic data, April durable-goods orders were favorable for core capital goods and aerospace and defense, and we saw month-over-month improvement in last month's new-home sales. However, the market was weighed by renewed speculation as to when the Federal Reserve will start to taper its stimulative efforts.

The net effect of the above led to a modest dip across all the major averages over the past week, though the S&P 500 is still 15.7% higher so far in 2013. 

The U.S. market is closed Monday in observance of the Memorial Day holiday, so we have a short trading week ahead -- and, as far as economic data flow is concerned, the real action will be had Thursday and Friday. Thursday, for instance, brings the first revision to the first-quarter gross domestic product, whose initial reading was 2.5%. While that's a rear-view-mirror figure at this point, the revision is bound to spark comparisons with how fast the economy is growing in the current quarter.

Friday will see the release of April numbers for personal income and spending, which will bring us the latest take on how the American consumer is holding up. While gas prices have ameliorated, you'd do well to keep an eye on disposable income and savings-rate figures. The personal savings rate has lately been well below the 3.5% average for 2012, and bears are watching this as gauge on consumers' future ability to spend. 

On the earnings front, the velocity of companies sharing their results continues to slow, though the shortened trading week will work to compress those reports. Consumer and retail names will be heavily represented: Earnings are due from such names as Tiffany (TIF), Movado (MOV) and Michael Kors (KORS), all of which serve consumers with mid- to upper-tier income. Meanwhile, Costco (COST), DSW (DSW) and others are the proxy for what I refer to as The Cash-Strapped Consumer.

Consumer and retail aside, we'll also hear the latest on the publishing industry when Books-A-Million (BAMM) reports its results. Given the ongoing shift toward eBooks, these numbers will offer insight into the larger, core book business at Barnes & Noble (BKS). In that vein, Lionsgate Entertainment (LGF) is set to clue us in to the health of the movie industry's box office. Year to date through May 23, overall box-office receipts are down 11.4%, even though Disney's (DISIron Man 3 topped $1.1 billion in ticket sales worldwide. For Lionsgate, the company's year-to-date gross is down 52% vs. the same period in 2012.

Here's a more detailed view on what's ahead this trading week. I hope you enjoy the Memorial Day weekend with your family, friends and loved ones.

___________________________

Economic Calendar

Monday, May 27

  • Memorial Day -- U.S. markets closed

____

Tuesday, May 28

  • Case-Shiller 20-City Index (March)
  • Consumer Confidence (May)

____

Wednesday, May 29

  • Mortgage Bankers Association Mortgage Index (Weekly)

 

Thursday, May 30

  • Initial and Continuing Jobless Claims (Weekly)
  • Gross Domestic Product Second Estimate (First Quarter of 2013)
  • Pending Home Sales (April)

____

Friday, May 31

  • Personal Income & Spending (April)
  • Chicago Purchasing Managers Index (May)
  • Michigan Sentiment Index -- Final (May)

_________________________

Earnings Calendar

Tuesday, May 28

  • Books-A-Million (BAMM)
  • Tiffany & Co. (TIF)
  • United Natural Foods (UNFI)

____

Wednesday, May 29

  • Avago Technologies (AVGO)
  • Brown Shoe Company (BWS)
  • Chico's FAS (CHS)
  • DSW Inc. (DSW)
  • Michael Kors Holding (KORS)
  • Movado Group (MOV)
  • The Fresh Market (TFM)
  • Tilly's, Inc. (TLYS)

____

Thursday, May 30

  • Big Lots (BIG)
  • Costco Wholesale (COST)
  • dEliA*s Inc (DLIA)
  • Esterline Technologies (ESL)
  • Express, Inc. (EXPR)
  • Fred's Inc. (FRED)
  • Guess?, Inc. (GES)
  • Joy Global (JOY)
  • Palo Alto Networks (PAWN)

____

Friday, May 31

  • Genesco Inc. (GCO)
  • Loins Gate Entertainment (LGF)
  • Pall Corp. (PLL)

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