The Week Ahead: Consumers Still Under Pressure

 | Aug 24, 2014 | 8:00 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

gps

,

anfi

,

bby

,

tif

,

coty

,

rgs

Last week was filled with anticipation over what Federal Reserve Chairperson Janet Yellen would say in her speech at the Jackson Hole, Wyo., economic conference. The Federal Open Market Committee had already released minutes from the July meeting, and flash purchasing managers indices came in mixed from the U.S., the eurozone and China. Nonetheless, many folks were still waiting for any and all insight from Yellen on the timing of interest-rate hikes on U.S. Treasuries.

Nonetheless, those comments were overshadowed on Friday by the reported wee-early-morning crossing of a Russian convoy into Ukraine ahead of the planned Aug. 26 meeting between Ukraine President Petro Poroshenko and Russia's Vladimir Putin. We expect the drama to continue ramping up ahead of the meeting. In all likelihood, that means the return of volatility to the stock market, at least for the short term.

As for Janet Yellen, it's no secret that Wall Street and the markets were looking for hints as to how long the Fed will maintain its easy-money policy of low-to-zero interest rates. Yellen's comments were essentially a rehash of her July testimony to Congress: If the job market continues to improve more rapidly than expected, or if inflation rises quickly to the Fed's 2% annual goal, the central bank could raise rates sooner than expected. But if progress stalls, low rates will persist.

In reviewing Yellen's comments, it's important for us to distinguish between the stock market and the economy. She remains focused on job creation, but we have to remember that the shift toward part-time employment and lower-wage jobs has comprised a key part of the claimed "jobs recovery." In reality, disposable incomes have been under significant pressure. Gas prices have dropped from last year, and are now at their lowest levels since 2010 -- but, if not for this, we would have really felt the wallop of higher food prices in the recent consumer price index.

The consumer remains under pressure, and we are keeping our eyes peeled for signs of wage growth, but this has yet to materialize. The July personal income and spending report, due out Friday, is likely to show little movement in disposable income.

So, while the manufacturing economy continues to hum, this tells us that -- absent a rebound in business investment -- we should not expect a substantial pick-up here in the second half of the year. We're looking for the July durable-orders report to confirm the tone in manufacturing, and the second print on second-quarter gross domestic product should shed some light on inventory building that was done during the quarter. Other clues, including a view-askew look on the July rebound in housing starts, will be had in Monday's release of July new-home-sales data.

All that said, when we factor in Yellen's comments and the skewed-but-improving U.S. economic data, the U.S. stock market continues to look more favorable than do bourses in much of the rest of the world. This view has been reinforced by worries in the eurozone over weakening economic trends -- even before the real impact of Russian sanctions are felt and before European Central Bank President Mario Draghi calls for more stimulus. The renewed concerns about China's growth prospects have only served to further improve the appeal of the U.S. market, despite the concerns we hear daily in the headlines.

Turning to the earnings calendar for the coming days, we will indeed hear from some technology companies, such as TiVo (TIVO) and Avago Technologies (AVGO), and food companies such as Sanderson Farms (SAFM) and Bob Evans Farms (BOBE).

Still, much of the focus will be on retail earnings. While earnings from Gap (GPS) and others were positive last week, all in all it's been a mixed bag for this sector. That is not surprising given the state of the U.S. consumer, as illustrated in our comments above. Key retail reports to watch will include Abercrombie & Fitch (ANFI) and Best Buy (BBY). The latter, in fact, may potentially offer some clarity on back-to-school spending for consumer electronics, laptops and tablets.

For insight into the higher-end consumer, we can look to Tiffany (TIF) and fragrance-and-cosmetic company Coty (COTY). Finally, while it may not be all that sexy, Chris Versace will be giving more than a once-over on shares of hair-salon chain Regis (RGS) as students shed their sun-bleached summer locks and both ladies and gents get ready for the holidays. Hopefully he won't discover a comb-over hiding bad news.

Below is more detailed look at what's coming at you in the week ahead. Be sure to check back midweek for The Corner of Wall & Main, in which we 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, Aug. 25

  • New-Home Sales (July)

____

Tuesday, Aug. 26

  • Durable Orders (July)
  • Case-Shiller 20-City Index (June)
  • Federal Housing Finance Agency (FHFA) Housing Price Index (June)
  • Consumer Confidence (August)

____

Wednesday, Aug. 27

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Crude Inventories (Weekly)

____

Thursday, Aug. 28

  • Initial and Continuing Jobless Claims
  • Gross Domestic Product (GDP) -- Second Estimate (Second Quarter of 2014)
  • Pending Home Sales (July)
  • Natural Gas Inventories (Weekly)

____

Friday, Aug. 29

  • Personal Income and Spending (July)
  • Personal Consumption Expenditures (PCE) (July)
  • Chicago Purchasing Managers Index (PMI) (August)
  • Michigan Sentiment Survey -- Final (August)

_________________

Earnings Calendar

Monday, Aug. 25

  • Adept Technology (ADEP)
  • Qihoo 360 Technology (QIHU)
  • Renren Inc. (RENN)

____

Tuesday, Aug. 26

  • Analog Devices (ADI)
  • Aruba Networks (ARUN)
  • Best Buy (BBY)
  • DSW Inc. (DSW)
  • Movado Group (MOV)
  • Regis Corp. (RGS)
  • Sanderson Farms (SAFM)
  • Smith & Wesson (SWHC)
  • TiVo Inc. (TIVO)

____

Wednesday, Aug. 27

  • Brown Forman (BF.A)
  • Bob Evans Farms (BOBE)
  • Brown Shoe Co. (BWS)
  • Chico's FAS (CHS)
  • Dycom Industries (DY)
  • Express, Inc. (EXPR)
  • Guess? Inc. (GES)
  • Tiffany & Co. (TIF)
  • Williams-Sonoma (WSM)

____

Thursday, Aug. 28

  • Abercrombie & Fitch (ANFI)
  • Avago Technology (AVGO)
  • Books-a-Million (BAMM)
  • Coty Inc. (COTY)
  • Casella Waste Systems (CWST)
  • Dollar General (DG)
  • Pall Corp. (PLL)
  • Pacific Sunwear (PSUN)
  • Signet Jewelers (SIG)
  • Zoe's Kitchen (ZOES)

____

Friday, Aug. 29

  • Big Lots (BIG)

Columnist Conversations

AAPL needs to clear this hurdle IF this last low is any good!! View Chart » ...
The Fed didn't raise interest rates, but the market did via lower bond and note prices. The recent run in Trea...
WHR has regained all the of the ground lost over the last nine sessions during today's rip higher. The st...
Just to let you know, the three dissents come from governors who will not be voting members in 2015. Fisher i...

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.