Despite some dips last week and renewed headlines over the "fiscal cliff," the overall stock market edged up last week: The Dow Jones Industrial Average rose 0.1%, the S&P 500 climbed 0.5% and the technology-heavy Nasdaq gained 1.5%. Last week also closed the books on November, so we now have one month left to go to close our fourth quarter of 2012.
That means it's time to check in on the consensus expectations for current-quarter operating earnings from S&P 500 companies. Surprisingly, the average consensus figure of $26.50 per share is unchanged over the last 30 days. Over that period, we've experienced Hurricane Sandy, seen a rebound in layoffs and watched more companies cut forward guidance than we have in some time.
Last week we started to see the distortion that Hurricane Sandy will have on the economic data we will be seeing this week. On an aggregate basis, October new-home sales fell 0.3%. Sifting through the data, however, shows that this drop reflected Hurricane-Sandy-related declines in the Northeast and South. With the pick-up in economic data ahead this week, we'll have to dig a little deeper to interpret the truer meaning in the data.
Will it be easy? Probably not, as we will also be dealing with the growing sense of "fiscal cliff" concern. As I've noted over the last few weeks, companies such as Hanes Brands (HBI), Northrop Grumman (NOC) and Groupon (GRPN) competitor Living Social, to name a few, have started to trim their respective head-counts. So have municipalities like Detroit and Anchorage.
Those are but a handful of entities that have made such announcements over the last few weeks, and that -- as well as the impact of Hurricane Sandy -- will be felt in Friday's November Employment Report. Also in the coming days, we'll get the latest manufacturing data pertaining to not only the U.S., but also the eurozone and China. That means watching the industrial stocks such as Caterpillar (CAT), Cummins (CMI), Paccar (PCAR) and Emerson Electric (EMR), among others. Following Yum! Brands (YUM) guidance last week, which said China fourth-quarter same-store sales are expected to be down 4%, many will be scrutinizing the HSBC report on China's manufacturing activity this week.
Those two sets of reports -- manufacturing activity and domestic employment -- will bookend the week, and in between we can expect more political theater as it pertains to Washington cutting a workable deal to avoid the "fiscal cliff." As I have said before, companies and consumers will hope for the best, but they also have to start preparing for the worst. So be aware that, even though the 2012 holiday shopping season started off on a strong note, there are still more than three weeks to go before the Christmas holiday. Remember that, last year, holiday shopping started strong and faded as we got closer to Christmas -- and that was without any "fiscal cliff" to worry about.
Also before Friday's report on job creation in November, we'll see earnings from several companies whose stocks are heavily shorted. These include Pandora (P), with more than 34 million shares short as of mid-November, per Nasdaq, Lululemon Athletica (LULU); with 14.7 million shares short; and Vera Bradley (VRA), with 11.3 million shares short. Stocks with high short interest can be tricky -- a short squeeze could result if a company beats expectations, or we could see a steep drop should the shorts be right on the fundamentals.
Here's a more granular look at what investors should be watching and listening to over the next five trading days:
Economic Events This Week
- HSBC China Manufacturing Purchasing Managers Index (November) -- Monday, Dec. 3
- Markit Eurozone Manufacturing Purchasing Managers Index (November) -- Monday, Dec. 3
- Markit U.S. Manufacturing Purchasing Managers Index (November) -- Monday, Dec. 3
- Institute for Supply Manufacturing -- Manufacturing Index (November) -- Monday, Dec. 3
- Construction Spending (October) -- Monday, Dec. 3
- Auto & Truck Sales (November) -- Monday, Dec. 3
- Mortgage Bankers Association Mortgage Index (Weekly) -- Wednesday, Dec. 5
- ADP Employment Report (November) -- Wednesday, Dec. 5
- Factory Orders (October) -- Wednesday, Dec. 5
- ISM Services Index (November) -- Wednesday, Dec. 5
- Challenger Job Cuts Report (November) -- Thursday, Dec. 6
- Initial & Continuing Jobless Claims (Weekly) -- Thursday, Dec. 6
- Nonfarm Payrolls and Unemployment Rate (November) -- Friday, Dec. 7
- Michigan Sentiment Index (December) -- Friday, Dec. 7
- Consumer Credit (October) -- Friday, Dec. 7
Corporate Earnings This Week
- AutoZone (AZO) -- Tuesday, Dec. 4
- Big Lots (BIG) -- Tuesday, Dec. 4
- Casella Waste Systems (CWST) -- Tuesday, Dec. 4
- Mattress Firm (MFRM) -- Tuesday, Dec. 4
- Pandora -- Tuesday, Dec. 4
- Pep Boys (PBY) -- Tuesday, Dec. 4
- Vitesse Semiconductor (VTSS) -- Tuesday, Dec. 4
- Brown Forman (BF.A) -- Wednesday, Dec. 5
- Finisar (FNSR) -- Wednesday, Dec. 5
- Resource America (REXI) -- Wednesday, Dec. 5
- Science Applications (SAI) -- Wednesday, Dec. 5
- Sigma Designs (SIGM) -- Wednesday, Dec. 5
- Toro (TTC) -- Wednesday, Dec. 5
- Vera Bradley -- Wednesday, Dec. 5
- Analogic (ALOG) -- Thursday, Dec. 6
- Canadian Imperial Bank (CM) -- Thursday, Dec. 6
- Cooper (COO) -- Thursday, Dec. 6
- Esterline Technologies (ESL) -- Thursday, Dec. 6
- H&R Block (HRB) -- Thursday, Dec. 6
- Lululemon Athletica -- Thursday, Dec. 6
- Men's Wearhouse (MW) -- Thursday, Dec. 6
- Palo Alto Networks (PANW) -- Thursday, Dec. 6
- Smithfield Foods (SFD) -- Thursday, Dec. 6
- Smith & Wesson (SWHC) -- Thursday, Dec. 6
- TD Bank (TD) -- Thursday, Dec. 6