The Week Ahead: What a Ride

 | Jun 02, 2013 | 8:00 PM EDT  | Comments
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Stock quotes in this article:

dg

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vra

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ann

What a ride last week was. Not only did it close out trading for the month of May, but we saw quite the late drop in the market Friday. In the last two hours of trading that session, the S&P 500 fell 1.42%, just shy of 24 points, to cap that index's gain at 3% for the month. While the S&P exited May up 14.4% year to date, the last several days have raised concerns as to what lies ahead for the stock market near-term. Helping fuel those worries has been the "larger" 2% pullback in the S&P 500 since its recent peak on May 22, combined with what I would call spotty economic data. 

While I am more of a fundamental investor, I do keep an eye on several individual stock charts, as well as those for the major indices. When I look at some of the more basic charts for the S&P 500 and the Dow Jones Industrial Average, these suggest that the indices must lose another 1.6% to 1.9% before they hit their respective 50-day moving average support lines. A similar back-of-the-napkin analysis implies that the potential support level for the Nasdaq is 3.5% lower than Friday's close. 

S&P 500

Dow Jones Industrial Average

Nasdaq Composite

All told, should such a dip emerge, it would constitute the first near-5% pullback that we have seen in some time. While this could represent some froth coming off the market, the coming economic data are what will help determine whether the averages are ahead of themselves. While we wait for what's actually in store, my suggestion to Real Money investors is to revisit those companies whose shares have pulled back despite strong competitive positions and favorable outlooks. This could be an opportunity for a handful of names when we look six to 12 months out.

With that in mind, we'll get the latest, if not the greatest, report on the global manufacturing economy this week -- as well as country-specific data from a number of sources. Following HSBC's recent flash manufacturing purchasing managers index for China, the final data will be closely scrutinized for signs of either a near-term rebound or more contraction ahead. The same can be said about the Eurozone data. 

On the domestic front, we'll be getting a number of key economic indicators this week, including the Institute for Supply Management's indices on manufacturing and services, the Federal Reserve Beige Book and several indicators relating to job creation in May. Outside of the formal indicators, Ford (F), General Motors (GM) and other auto manufacturers will be issuing their sales figures for May. According to Edmunds.com, last month's U.S. auto sales are projected to rise 6.5% year over year to 1.42 million cars and trucks, for a seasonally adjusted annual rate of 15.1 million vehicles. That compares with 14.92 million in April. 

I'd note that, as we head into the trading week, the current expectation for nonfarm payrolls in May -- the Labor Department's employment data -- stands at 171,000 positions, with estimates ranging between 145,000 and 200,000. For perspective, the April ADP employment report came in at 119,000. As tends to be the case, these figures could be revised following the May ADP Employment Report that hits on Wednesday. 

Although we are two-thirds of the way through the current quarter, we'll continue to get earnings results this week. Over the next five days, those reports will skew toward retailers like Dollar General (DG), Vera Bradley (VRA), Ann Taylor (ANN) and others. Also scheduled for release are numbers from what I would call "one-offs," like Verifone (PAY), Shuffle Master (SHFL) and J.M. Smucker (SJM). That's not to discount what they have to say, but rather to point out that this week offers no cohesive group of reporting companies. 

 

__________________

Economic Calendar

Monday, June 3

  • HSBC China Manufacturing Purchasing Managers Index
  • Markit Eurozone Manufacturing PMI
  • Markit U.S. Manufacturing PMI
  • J.P. Morgan Global Manufacturing PMI
  • Institute for Supply Management Manufacturing Index (May)
  • Construction Spending (April)
  • Auto and Truck Sales (May)

____

Tuesday, June 4

  • Trade Balance (April)

____

Wednesday, June 5

  • HSBC china Services PMI
  • Markit Eurozone Services PMI
  • J.P. Morgan Global Services PMI
  • Mortgage Bankers Association Mortgage Index (Weekly)
  • ADP Employment Report (May)
  • Productivity and Unit Labor Cost (First Quarter of 2013)
  • Factory Orders (April)
  • Institute for Supply Management Services Index (May)
  • Federal Reserve Beige Book (June)

____

Thursday, June 6

  • HSBC Emerging Markets Index
  • Initial and Continuing Jobless Claims (Weekly)
  • Challenger Job-Cuts Report (May)

____

Friday, June 7

  • Employment Report (May)
  • Consumer Credit (April)

 

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Earnings Calendar

Monday, June 3

  • G-III Apparel Group (GIII)
  • Science Applications International Corp. (SAI)
  • Verint Systems (VRNT)

____

Tuesday, June 4

  • Analogic Corp. (ALOG)
  • Dollar General Corp. (DG)
  • Mattress Firm Holding (MFRM)
  • Shuffle Master (SHFL)

____

Wednesday, June 5

  • Brown Forman (BF.A)
  • Bob Evans Farms (BOBE)
  • Coldwater Creek (CWTR)
  • Hovnanian Enterprises (HOV)
  • Verifone Holdings (PAY)
  • rue321, Inc. (RUE)
  • Streamline Health Solutions (STRM)
  • Vera Bradley (VRA)

____

Thursday, June 6

  • Ann Taylor Stores (ANN)
  • Ciena Corp. (CIEN)
  • The Cooper Companies (COO)
  • IDT Corp. (IDT)
  • Measurement Specialties (MEAS)
  • Vail Resorts (MTN)
  • RealD Inc. (RLD)
  • The J. M. Smucker Co. (SJM)
  • Titan Machinery (TITN)

____

Friday, June 7

  • Christopher & Banks Corp. (CBK)
  • Comtech Telecommunications (CMTL)
  • Mobile TeleSystems (MBT)

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