The Week Ahead: Scaling a Wall of Murk

 | Sep 15, 2013 | 8:00 PM EDT  | Comments
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Stock quotes in this article:

adbe

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fdx

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gis

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pir

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dri

Despite mounting uncertainty, which I'll talk more about in a minute, the stock market has put in a very good week. Over the past five trading days, all of the major market indices climbed between 1.7% to just over 3%, making for one of the best weeks in a number of months.

Most of the past week's gains were achieved early, coincident with the emerging likelihood that the U.S. might avoid military action in Syria. However, that picture has gotten a little murky following a report by The Wall Street Journal. The piece indicated that a "secretive Syrian military unit at the center of the Assad regime's chemical weapons program has been moving stocks of poison gases and munitions to as many as 50 sites to make them harder for the United States to track, according to American and Middle Eastern officials."

Here comes the Fed. Syria is not the only log on the uncertainty fire. The Federal Reserve will hold its next Federal Open Market Committee this week, on Sept. 17 and Sept. 18. The stock market will be bracing to see if the central bank will start to taper its economic-stimulus spending and, if so, to what degree. For my money, following that disappointing August employment report -- which fell short on nearly every level and every metric -- the Fed is likely to taper modestly.

That view has been shored up by the Sept. 4 Beige Book report, which collects regional Fed data. The report found "that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August."

The consensus view is the Fed will start to taper, but what really matters this week is the extent of it. In other words, by how much will the Fed taper relative to the $85 billion it is currently buying each month? If the news is that the Fed will cut by more than $15 billion or so, the market won't digest that news easily.

Other economic data on tap for this week. Ahead of the Fed's decision, we'll get the latest take on the industrial and manufacturing economy in the form of industrial production and capacity utilization, as well as the Empire State manufacturing index. We're also due to get the August housing starts and building permit data, which will be closely watched as observers gauge what the recent hike in mortgage rates has done to housing demand. It bears repeating, by the way, that we'll need to look past the headline data to understand the trend in single-family housing vs. that for the more volatile multi-family housing.

Few but important corporate earnings. With only 11 trading days left until the close of the quarter, it's a little surprising to see that we're only now due to get earnings results from Adobe (ADBE), FedEx (FDX), General Mills (GIS), Pier 1 (PIR) and Darden (DRI), as well as a few others. FedEx's outlook in particular will be telling: Will it enjoy the rebound in the eurozone and China that is showing up in the economic data? What does it foresee regarding the U.S. market? What of its take for the holiday shipping season? Similarly, is Darden seeing a slowdown in traffic? Is progress being made at Darden chain Red Lobster?

Waiting for the debt ceiling show down. While it's a few weeks away, another "debt ceiling vs. government" showdown is looming. Last week, the House Republican leaders postponed a vote that would have approved the financing of the government through December.

A Friday memo to GOP members by Majority Leader Eric Cantor (R-VA) says that "the House will act to prevent a default on our obligations before" the mid-October deadline the Obama administration has established. "House Republicans," he says, "will demand fiscal reforms and pro-growth policies which put us on a path to balance in 10 years in exchange for another increase in the debt limit." Given the way that Washington has treated prior debt-ceiling negotiations, I expect a lot of bluster and finger-pointing in the coming days and weeks that could rattle the stock market.

 

__________________

Economic Calendar

Monday, Sept. 16

  • Empire State Manufacturing (September)
  • Industrial Production (August)
  • Capacity Utilization (August)

____

Tuesday, Sept. 17

  • Consumer Price Index (August)
  • National Association of Home Builders (NAHB) Housing Market Index (September)

____

Wednesday, Sept. 18

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Housing Starts (August)
  • Building Permits (August)
  • Federal Open Market Committee (FOMC) Rate Decision (September)

____

Thursday, Sept. 19

  • Initial and Continuing Jobless Claims (Weekly)
  • Existing Home Sales (August)
  • Philadelphia Federal Reserve Index (September)
  • Leading Indicators (August)

____

Friday, Sept. 20

  • No major economic releases

 

_________________

Earnings Calendar

Monday, Sept. 16

  • NAPCO Security Systems (NSSC)
  • Oclaro Inc. (OCLR)

____

Tuesday, Sept. 17

  • Adobe Systems (ADBE)
  • Digital Cinema Destinations (DCIN)
  • FactSet Research Systems (FDS)

____

Wednesday, Sept. 18

  • FedEx Corp. (FDX)
  • General Mills (GIS)
  • Oracle Corp. (ORCL)

____

Thursday, Sept. 19

  • Apogee Enterprises (APOG)
  • ConAgra Foods (CAG)
  • IHS Inc. (IHS)
  • Herman Miller (MLHR)
  • Pier 1 Imports (PIR)
  • Rite Aid Corp. (RAD)
  • Scholastic Corp. (SCHL)

____

Friday, Sept. 20

  • Darden Restaurants (DRI)

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