The Week Ahead: Stay on Your Toes

 | Jun 23, 2013 | 8:00 PM EDT  | Comments
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Stock quotes in this article:

kbh

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len

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ccl

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bbby

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swhc

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bbry

Wow -- what a ride last week was in stock-market land. The S&P 500 fell nearly 3.6% from last Tuesday's close through Friday's finish, and the culprits behind this were twofold. First there was the iffy Federal Reserve stimulus tapering timetable, as laid out Wednesday by Chairman Ben Bernanke. Second, there was the weaker-than-expected June flash purchasing managers index reading for China. I'd also point out that the details in the U.S. flash manufacturing PMI for this month were not all that great.

For any subscribers to Real Money Pro, here is my take on all this in case you missed it -- but the elevator pitch here is that the market reacted to Bernanke comments that were littered with "ifs". As I see it, Big Ben and the Fed have left themselves a great deal of wiggle room when it comes to stimulus tapering in the coming months. I suspect the market will realize this as it digests Bernanke's commentary further, and if U.S. economic data remain tepid. 

That means investors will be closely watching the Tuesday release of the May durable-orders report, as well as the latest housing indicators scheduled for this week -- new-home sales, mortgage applications and pending-home sales.

Investors will track that housing numbers as they attempt to gauge whether the sector's recovery has lost any steam since mortgage rates have backed up in recent weeks. I continue to see that rate climb as a good thing for housing, as it will spur fence-sitters into the market in the near term. Beyond this, though, this week's scheduled earnings results from KB Home (KBH) and Lennar (LEN) should help further answer that housing question. Backlog figures, in particular, will be something to keep your eye on as an indicator of the company's near-term prospects.

Also on tap this week will be the latest take on personal income and spending. Recent reports have not been favorable for disposable­-income or savings rates, so we'll see whether that continued in May. Putting color around that report will be results from Carnival (CCL) -- because, if you don't have much disposable income or savings, odds are you're not going on a cruise. Also helpful here will be Bed Bath & Beyond (BBBY) and Smith & Wesson (SWHC).

Regarding Smith & Wesson, firearms background checks by the Federal Bureau of Investigations peaked in January, and these numbers have been eroding month over month ever since. Although checks are up 34% year to date vs. 2012, May comparisons have risen only 9% year over year. This has raised the question as to whether, after a very strong 2011 and 2012, the steam is now out of the firearm market. 

We'll also get the latest in athletic wear when both Nike (NKE) and The Finish Line (FINL) issue their latest quarterly performance this week. Joining the reporting ranks this week, as well, is "love to hate or hate to love" BlackBerry (BBRY), which has introduced a few new phone models in recent months.

My concern with BlackBerry is the same as that with Nokia (NOK) and a number of other vendors: I'm worried about average selling price compression as the smartphone market starts to mature and incremental growth comes at the low-end price point. While I know there are folks who love their Blackberry devices, I am far less enthused over the long-term prospects, both for the company and for the shares.

When faced with a week like the last one, the prudent thing to do is to roll up your sleeves and ask if the demand drivers for your holdings have changed over the last few days. For example, I like Xylem (XYL) shares, given the billions of dollars that need to be spent in order to upgrade U.S. drinking-water and wastewater infrastructure.

Along with the topic of water comes the lingering drought that we've seen in several areas of the country, and that means I will be listening to Monsanto's (MON) outlook when it reports results later this week. Has that outlook changed in the last few days? Nope. The same can be said for a favorite cash-strapped consumer play -- McCormick & Co (MKC) -- which is also set to report this week.

Stay sharp, and keep this in mind: While it may be fun and exciting to trade short-term, there is nothing wrong with "boring" investing when you can score big profits by picking up solid stocks at more affordable prices. 

__________________

Economic Calendar

Monday, June 24

  • No major economic releases

____

Tuesday, June 25

  • Durable Orders (May)
  • Case-Shiller 20-City Index (April)
  • Federal Housing Finance Agency (FHFA) Housing-Price Index (April)
  • Consumer Confidence (June) 
  • New-Home Sales (May)

____

Wednesday, June 26

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Gross Domestic Product -- Third Estimate (First Quarter of 2013)

____

Thursday, June 27

  • Initial and Continuing Jobless Claims (Weekly)
  • Personal Income and Spending (May)
  • Personal Consumption Expenditures (PCE) Prices Core (May) 
  • Pending-Home Sales (May)

____

Friday, June 28

  • Chicago Purchasing Managers Index (June) 
  • Michigan Sentiment Index Final (June)

 

_________________

Earnings Calendar

Monday, June 24

  • Mitel Networks (MITL)
  • Sonic Corp. (SONC)

____

Tuesday, June 25

  • Apollo Group (APOL)
  • Barnes & Noble (BKS)
  • Carnival Corp. (CCL)
  • Lennar Corp. (LEN)
  • Smith & Wesson Holding (SWHC)
  • Walgreen Co. (WAG)

____

Wednesday, June 26

  • Bed Bath & Beyond (BBBY)
  • General Mills (GIS)
  • Monsanto (MON)
  • Progress Software (PRGS)

____

Thursday, June 27

  • Accenture (ACN)
  • Casella Waste (CWST)
  • KB Home (KBH)
  • McCormick & Co. (MKC)
  • Herman Miller (MLHR)
  • Nike Inc. (NKE)
  • Paycheck Inc. (PAYX)
  • Winnebago Industries (WGO)

____

Friday, June 28

  • AZZ Inc. (AZZ)
  • Research In Motion (BBRY)
  • The Finish Line (FINL)

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