Last week the S&P 500 fell 0.4%, bringing that index's quarter-to-date and year-to-date returns to 7.2% and 16.1%, respectively. As this move suggests, it was a mixed week in terms of news flow. We saw several positives, including stronger-than-expected earnings from KB Home (KBH), General Mills (GIS) and several others, as well as favorable housing data in the form of August housing starts and existing-home sales. All of these metrics, however, were offset by a number of disappointing headlines.
These disappointments included FedEx (FDX), which said the global economy remains weak, and which provided a weaker view on 2012 earnings than what had been expected. Elsewhere, Norfolk Southern (NSC) cut its outlook, citing weak coal and merchandise demand, and MasterCard (MA) warned of slower revenue growth ahead.
On the manufacturing side of the equation, both the Philadelphia Fed index and the Empire Manufacturing Index indicated that, after the spat of economic contraction in those regions over the last several months, we saw a continuance of that contraction in September. The takeaway is the domestic economic recovery remains tepid. With more companies announcing price increases, the risk of inflation is rising, and that is likely to pressure the consumer in coming months.
Looking across the pond into the eurozone, economic news last week pointed toward continued economic weakness in the region. Markit Economics reported the steepest contraction in the region since 2009, with employment falling for the ninth consecutive month across the eurozone. More specifically, the flash reading for the eurozone purchasing managers index (PMI) fell to 45.9 in September, marking a 39-month low and the 12th month of economic contraction in the last 13 months.
Moving further east, last week HSBC reported its Flash China Manufacturing PMI reading for September. While the headline number indicated the index had rebounded to a two-month high, the reality was that this indicator has pointed toward an economic contraction over the last several months -- and that continued with the September flash reading. HSBC also released its Flash China Manufacturing Output Index for September, and the reading of 47 marked the lowest level in the last 10 months.
Only a handful of trading days are left in the quarter, and economic indicators point toward economic headwinds. So, as we head into corporate-earnings season, investors are likely to adopt a more conservative stance in order to preserve year-to-date gains. In the last few weeks, a number of companies have warned of shortfalls relative to Wall Street expectations, and odds are we'll see at least a few more in the coming days. Apart from potential warnings, a number of companies -- such as Nike (NKE), Lennar (LEN) and Walgreen (WAG) -- are scheduled to report earnings this week. Their forecasts for the balance of the year will be sliced, diced and scrutinized, and used as tea leaves for competitors, customers and suppliers.
As for economic data on tap over the coming week, it will be relatively slow going until midweek, when we're due to receive a host of housing-related data, as well as the latest snapshot on the manufacturing economy and the health of the consumer. Data from Gallup and others point to better personal spending in August, and we'll see if the official government statistics confirm this Friday. The same goes for sentiment readings: On Friday, we'll receive both the Consumer Confidence reading for September and the Michigan Sentiment Index for September. Data collected by Gallup through the first half of September shows higher economic confidence readings than in August.
Here's a more granular look at what's on the docket over the next five days:
- Case-Shiller 20-city Index (July) -- Tuesday, September 25
- Consumer Confidence (September) -- Tuesday, Sept. 25
- Federal Housing Finance Agency (FHFA) Housing Price Index (July) -- Tuesday, Sept. 25
- MBA Mortgage Index (Weekly) -- Wednesday, Sept. 26
- New Home Sales (August) -- Wednesday, Sept. 26
- Initial & Continuing Jobless Claims (Weekly) -- Thursday, Sept. 27
- Durable Orders (August) -- Thursday, Sept. 27
- Gross Domestic Product -- Third Estimate (2Q 2012) -- Thursday, Sept. 27
- Personal Income & Spending (August) -- Friday, Sept. 28
- Personal Consumption Expenditures Price Index (August) -- Friday, Sept. 28
- Chicago Purchasing Managers Index (Sept.) -- Friday, Sept. 28
- Michigan Sentiment Index, Final (Sept.) -- Friday, Sept. 28
- Lennar (LEN) -- Monday, Sept. 24
- Carnival (CCL) -- Tuesday, Sept. 25
- FactSet Research Systems (FDS) -- Tuesday, Sept. 25
- Jabil Circuit (JBL) -- Tuesday, Sept. 25
- MTN Resorts (MTN) -- Tuesday, Sept. 25
- Paychex (PAYX) -- Tuesday, Sept. 25
- Red Hat (RHT) -- Tuesday, Sept. 25
- Landec (LNDC) -- Wednesday, Sept. 26
- Progress Software (PRGS) -- Wednesday, Sept. 26
- Accenture (ACN) -- Thursday, Sept. 27
- Discover Financial Services (DFS) -- Thursday, Sept. 27
- IDT (IDT) -- Thursday, Sept. 27
- McCormick (MKC) -- Thursday, Sept. 27
- Micron Technology (MU) -- Thursday, Sept. 27
- Nike (NKE) -- Thursday, Sept. 27
- Research In Motion (RIMM) -- Thursday, Sept. 27
- Sealy (ZZ) -- Thursday, Sept. 27
- Texas Industries (TXI) -- Thursday, Sept. 27
- American Greetings (AM) -- Friday, Sept. 28
- The Finish Line (FINL) -- Friday, Sept. 28
- Walgreen (WAG) -- Friday, Sept. 28
Upcoming Investor Conferences
- HSBC 3rd Annual Global Natural Resources Conference -- Sept. 24-25
- Morgan Stanley Healthcare Supply Chain Panel Day -- Oct. 5
- BIO Investor Forum 2012 -- Oct. 9-10
- Brean Murray, Carret & Co. 2012 Life Sciences Summit -- Nov. 7
- J. P. Morgan Asia Pacific TMT Conference -- Nov. 12-13
- Credit Suisse 2012 Healthcare Conference -- Nov. 14
- Roth Capital Partners Enterprise Software Corporate Access Day -- Nov. 14
- Jefferies 2012 Global Healthcare Conference -- Nov. 14-15
- UBS Global Technology Conference -- Nov. 14-15
- William Blair Second Annual Financial Services and Technology Summit -- Nov. 15
- William Blair Real Estate Services and Technology Summit -- Nov. 16
- UBS Global Real Estate Conference -- Nov. 27-28
- Credit Suisse 2012 Aerospace & Defense Conference -- Nov. 28-29
- Jefferies 2012 Global Energy Conference -- Nov. 28-29
- J.P. Morgan SMid Cap Conference -- Nov. 28-29
- UBS 40th Annual Global Media and Communications Conference -- December 3-5