The Week Ahead: Lingering Consumer Concerns

 | Jun 08, 2014 | 8:00 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

sjm

,

krft

,

amzn

,

hds

,

rh

,

ulta

,

lulu

,

unfi

The stock market closed out last week on a strong note, with the S&P 500 gaining 1.3% -- bringing the index's year-to-date return to 5.5%. We've also seen a rebound in technology: Shares of Amazon (AMZN) rebounded hard late last week following a new product announcement set for June 18. The "smart money" is betting on a smartphone, and I am inclined to agree -- but as I detailed on Friday, there are other reasons to be a buyer of Amazon now.

With three weeks to go until the close of the June quarter, Wall Street will be scrutinizing the data we get in order to determine how strong of a snap-back we will see in the economy. Those same figures will be matched up against prior company guidance to assess to what degree companies will report better-than-expected results.

We've continued to get a favorable picture of the industrial world last week, but the big question remains on the jobs front. Even though housing activity has picked up, the May manufacturing report from the Institute for Supply Management revealed a drop in employment. The Markit economics report, meanwhile, suggested flat employment vs. the prior month. That was corroborated by the month-over-month dip in ADP's findings, which said the private sector added 179,000 jobs in May -- well below the consensus expectation of 215,000 jobs, and down from 220,000 in April.

The "official" employment data from the Bureau of Labor Statistics showed 217,000 jobs created in May, down from 282,000 in April. Breaking that report down, we find few to no manufacturing jobs created in the month. Rather, we see continued growth for lower-wage jobs in retail, leisure, hospitality and healthcare. Unsurprisingly, we saw little gains in wages.

As Lenore Hawkins and I talked about in last week's Corner of Wall & Main, one of the concerns we share is about the impact of rising prices and the potential pass-through to the consumer. Well, last week we saw J.M. Smucker (SJM) and Kraft Foods (KRFT) raise their coffee prices by 9% and 10%, respectively.

This follows similar moves by fast-food restaurant companies -- and, given moves in other inputs, it's probably not the last announcement we'll see on a price increase. We'll get May retail sales data this week. But last month's consumer price index report, due on June 17, is what will be far more insightful. If this CPI data runs hotter than expected -- and there are reasons to think it will do just that -- expect concern over the consumer's ability to spend to be a summer-long topic and raise doubts about back-to-school spending this year.

Circling back to the employment front, this week brings the latest Job Openings and Labor Turnover Survey (JOLTS). Granted, this April report offers rear-view-mirror data, but the reports vector will be one to watch. I say that because the last report for March showed 4 million job openings, which was little changed from February. Sifting below the headlines, the April report should give us a better sense to which industries are hiring and ones that are not. That'll be useful information as we flesh out our June-quarter investing mosaic.

With so few weeks left in the current quarter, earnings reports are slowing, but there are still some worth paying attention to.

In particular, HD Supply (HDS), Restoration Hardware (RH), Ulta Salon, Cosmetics & Fragrance (ULTA) and LuluLemon (LULU) will be among the more closely watched of this week's earnings reports. The Thematic Growth Portfolio has positions in United Natural Foods (UNFI) as a beneficiary of the lifestyle of health and sustainability (LOHAS) trend, which has more grocery chains -- such as Safeway (SWY) and Kroger (KR) -- expanding their organic, gluten-free, paleo and other alternative offerings. Given this, the United Natural report is one I will be focused on this week.

Here's a more detailed look at what you can expect in the week ahead. Be sure to check back midweek for the Corner of Wall & Main, in which Lenore Hawkins and I will dish on the first half of the trading week and other key matters and thoughts -- as well as how to play it all.

 

__________________

Economic Calendar

Monday, June 9

  • Nothing meaningful due for release

____

Tuesday, June 10

  • Wholesale Inventories (April)
  • Job Openings and Labor Turnover Survey (JOLTS) (April)

____

Wednesday, June 11

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Crude Inventories (Weekly)
  • Treasury Budget (May)

____

Thursday, June 12

  • Initial and Continuing Jobless Claims (Weekly)
  • Retail Sales (May)
  • Import and Export Prices (May)
  • Business Inventories (April)
  • Natural Gas Inventories (Weekly)

____

Friday, June 13

  • Producer Price Index (May)
  • Michigan Sentiment Index (June)

________________

Earnings Calendar

Monday, June 9

  • Comverse Inc. (CNSI)
  • Majesco Entertainment (COOL)
  • IDT Corp. (IDT)

____

Tuesday, June 10

  • Casey's General Stores (CASY)
  • Christopher & Banks Corp. (CBK)
  • Cherokee Inc. (CHKE)
  • HD Supply Holdings (HDS)
  • Pep Boys (PBY)
  • RadioShack (RSH)
  • Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA)
  • United Natural Foods (UNFI)

____

Wednesday, June 11

  • H&R Block (HRB)
  • Restoration Hardware (RH)
  • Sigma Designs (SIGM)

____

Thursday, June 12

  • Finisar (FNSR)
  • Lakeland Industries (LAKE)
  • LuluLemon Athletica (LULU)
  • Men's Wearhouse (MW)
  • Rand Logistics (RLOG)

____

Friday, June 13

  • Culp, Inc. (CFI)
  • Luby's Inc. (LUB)

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.