The Week Ahead: An Interesting Few Days in Store

 | Sep 22, 2013 | 7:00 PM EDT  | Comments
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Stock quotes in this article:

dri

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bbry

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qcom

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swks

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csre

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kbh

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len

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mkc

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nke

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finl

It's hard to imagine after the drop in the stock market last Friday, but for all of last week the major stock market indices all closed higher, marking their third consecutive week of gains. The week started off with worry over what degree the Fed would taper its stimulative efforts -- and then the market rocketed higher after we learned the Fed did not taper at all. Then the indices fell on Friday as concerns over why the Fed didn't tighten, and the looming debt-ceiling fight, came to the forefront of the conversation.

As Fed chief Ben Bernanke laid out in his prepared remarks this past Wednesday, the central bank will continue its highly accommodative policies at least until the U.S. economy hits a 6.5% unemployment rate. Specifically, Bernanke said (PDF) Federal Open Market Committee participants, in the aggregate, see "the projected unemployment rate for the fourth quarter of next year encompasses 6.5%, 12 of the 17 participants expect the first rate increase to take place in 2015 and two expect it to occur in 2016."  

This all quickly cooled off the strong rise in 10-year U.S. Treasury yields -- a move that had commenced in early May. As I talked about last week, several sectors will once again look attractive. However, if there are fresh concerns over the speed of the economy and we factor in rising uncertainty in the coming two weeks thanks to Washington, not all groups will be back in favor near-term. Housing could be one of those that does not bounce back, and that wouldn't be surprising, given the weak August employment report and the recent and tepid Fed Beige Book report.

Given concerns over the ability of the consumer to spend -- see Darden's (DRI) result from Friday -- and the drop in the 10-year Treasury yield, consumer non-discretionary companies looks like a place that will get some interest. 

Also late on Friday, smartphone company Blackberry (BBRY) dropped a bombshell. The firm said it will report an operating loss near $1 billion in its fiscal second quarter due to an inventory buildup of unsold smartphones, and that it will be laying off 4,500 employees. As the saying goes, where there's smoke there is fire -- and chatter over a headcount chop at Blackberry had made the rounds early last week. I've been a bear on BlackBerry: My recommendation has been to forget the shares in favor of companies like Qualcomm (QCOM), Skyworks Solutions (SWKS), CSR (CSRE) and others that are poised to benefit from not only smartphones and tablets, but also the connected car, and the connected home and wearables in the long term. 

We're coming into the final stretch of the third quarter -- only six trading days are left until the books are closed and we begin the last leg of 2013. Over the next two weeks, we'll be tuned in for any positive or negative pre-earnings announcements for the September quarter.

Ahead of that, we'll be getting a bunch of housing data in the coming week, and we'll also be hearing from both KB Homes (KBH) and Lennar (LEN). Analysts will parse management commentary from these two companies regarding the degree to which the rise in mortgage rates is hindering their respective businesses. Other notable companies reporting their quarterly results next week include one of my favorite names -- McCormick (MKC) -- as well as Nike (NKE) and the Finish Line (FINL). 

Ahead of all of that, however, we'll be getting the latest flash readings on the U.S., eurozone and China economies, courtesy of Markit Economics and HSBC and the results of the elections in Germany. As if that weren't enough, I expect the verbiage out of Washington to kick into higher gear when it comes to the debt ceiling vs. government shutdown. 

Needless to say, it will be an interesting week.

Here's a more detailed look at what's on tap in the week ahead:

 

Economic Calendar

Monday, Sept. 23

  • HSBC China flash Manufacturing Purchasing Managers Index (PMI)
  • Markit Germany Flash Composite PMI
  • Markit Eurozone Flash Composite PMI
  • Markit U.S. Flash Manufacturing PMI

____

Tuesday, Sept. 24

  • Case-Shiller 20-City Index (July)
  • Federal Housing Finance Agency (FHFA) Housing Price Index (July)
  • Consumer Confidence (September)

____

Wednesday, Sept. 25

  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Durable Orders (August)
  • New Home Sales (August)

____

Thursday, Sept. 26

  • Initial and Continuing Jobless Claims (Weekly)
  • Gross Domestic Product -- Third Estimate (Second Quarter of 2013)
  • Pending Home Sales (August)

____

Friday, Sept. 27

  • Personal Income and Spending (August)
  • Personal Consumption Expenditures (PCE) Prices (August)
  • Michigan Sentiment Index -- Final ( September)

________________

Earnings Calendar

Monday, Sept. 23

  • Park City Group (PCYG)
  • Red Hat (RHT)

____

Tuesday, Sept. 24

  • AAR Corp. (AIR)
  • Carnival Corp. (CCL)
  • KB Home (KBH)
  • CarMax Inc. (KMX)
  • Lennar Corp. (LEN)

____

Wednesday, Sept. 25

  • AutoZone Inc. (AZO)
  • Bed Bath & Beyond (BBBY)
  • Jabil Circuit (JBL)
  • Progress Software (PRGS)

____

Thursday, Sept. 26

  • Accenture Ltd. (ACN)
  • Authentidate Holding Corp. (ADAT)
  • Aehr Test Systems (AEHR)
  • McCormick & Co. (MKC)
  • Nike Inc. (NKE)
  • Worthington Industries (WOR)

____

Friday, Sept. 27

  • BlackBerry (BBRY)
  • The Finish Line (FINL)
  • Vail Resorts (MTN)
  • USA Technologies (USAT)

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