The Week Ahead: Racing Toward Year-End

 | Dec 15, 2013 | 8:00 PM EST  | Comments
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Stock quotes in this article:

fdx

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dri

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nke

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pir

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ccl

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len

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kbh

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kmx

The clock is ticking down to the Christmas holiday, and that means shopping for presents and stocking stuffers, gift-wrapping and holiday cards. Yep, the pace of activity is picking up as we race toward the holidays and the end of 2014 -- but it was also a busy week in the market and in Washington. We saw some nice moves early in the week, but the overall stock market sagged during the last few days as it has continued contemplating the Federal Reserve's next move. All told, the S&P 500 dipped just over 1.6% last week.

Adding fuel to the uncertainty fire, last week Standard & Poor's cut its 2014 U.S. gross domestic product forecast. The credit-rating agency is now calling for 2.6% growth, down from its original 3.1% view. Part of the rationale behind the cut was "additional sequester spending cuts in 2014, as well as the potential for another political standoff in Washington after the October government shutdown."

However, it seems S&P may have been a bit premature in its revision, given the two-year bipartisan budget deal that was approved by the House of Representatives last week. The agreement sets discretionary spending at more than $1 trillion for the next two fiscal years and replaces sequester cuts slated to take effect in January. Still, it doesn't extend emergency unemployment benefits or address the debt ceiling. The bill will go to the Senate next week, and President Obama has indicated he would sign it into law.

Given the fast-approaching holiday, the coming trading week will be a rather busy one for many of you. I know it will be for me. In addition to the potential budget deal snaking its way through the Senate, we'll have our regular stream of economic data and corporate earnings (more on that below).

On the economic side of the equation, we will be getting not only the November reading for industrial production, but also several months of housing-starts data. In the industrial-production figure, I'll be looking for confirmation of the strong orders component of the Institute for Supply Management's November manufacturing index. As far as housing goes, we will get caught up with three months of housing starts data this week, and it's these last few missing pieces that will tell us if the housing market is continuing to rebound or stalling. I suspect housing has more room to climb -- but, again, we need the data.

As we review these economic releases, the key takeaway to gauge will be how strong the U.S. economy is. The second view on third-quarter GDP, recently released, was much stronger than expected: It came in at an annualized 3.6%, up from the prior 2.8%.

That sounds good -- but, as I always say, we cannot simply rely on the headline figures. The real scoop, much like with the monthly employment report, is always found deeper in the figures. If we dig into those upwardly third-quarter figures, and if we strip out inventory growth -- which accounted for 1.68 percentage points of the quarter's growth -- we find the underlying economy grew at 1.9%. That's down from the 2% reading in the initial reading. Like I said, this week's economic data will be watched, and could fuel discussion of the prospects that the Fed will taper quantitative easing -- or, alternatively, it could put a damper on such talk.

On the earnings front, FedEx (FDX), Darden (DRI), Nike (NKE) and others are on tap. These companies' outlooks should offer some insight into the consumer, as should Pier 1 Imports (PIR) and Carnival (CCL). Alongside that deluge in housing-starts data, Lennar (LEN) and KB Home (KBH) will issue their latest results. Another to watch, for clues on whether the domestic auto rebound is likely to stay the course, is CarMax (KMX).

Here's a more detailed look at what's on tap in the week ahead. Be sure to check out the conversation I had with The Street's Brittany Umar, in which we touched on some of the key earnings reports to watch this week.

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Economic Calendar

Monday, Dec. 16

  • HSBC China Flash Manufacturing Purchasing Managers Index (PMI)
  • Markit Eurozone Flash Composite PMI
  • Marit U.S. Flash Manufacturing PMI
  • Empire Manufacturing Index (December)
  • Unit Labor Costs and Productivity (Third Quarter of 2013)
  • Industrial Production and Capacity Utilization (November)

____

Tuesday, Dec. 17

  • Consumer Price Index (November)
  • National Association of Home Builders (NAHB) Housing Index

____

Wednesday, Dec. 18

  • Markit U.S. Flash Services PMI
  • Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
  • Housing Starts (September, October and November)
  • Building Permits (September, October and November)
  • Federal Open Market Committee (FOMC) Rate Decision (December)

____

Thursday, Dec. 19

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

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Friday, Dec. 20  

  • Gross Domestic Product (GDP) -- Third Estimate (Third Quarter 2013)

 

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Earnings Calendar

Monday, Dec. 16

  • Rick's Cabaret International (RICK)

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Tuesday, Dec. 17

  • FactSet Research Systems (FDS)
  • VeriFone Holdings (PAY)
  • Sanderson Farms (SAFM)

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Wednesday, Dec. 18

  • FedEx Corp. (FDX)
  • General Mills (GIS)
  • HEICO Corp. (HEI)
  • Jabil Circuit (JBL)
  • Lennar Corp. (LEN)
  • Oracle (ORCL)

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Thursday, Dec. 19

  • Accenture Ltd. (ACN)
  • AAR Corp. (AIR)
  • ConAgra Foods (CAG)
  • Carnival Corp. (CCL)
  • Darden Restaurants (DRI)
  • KB Home (KBH)
  • Herman Miller (MLHR)
  • Nike Inc. (NKE)
  • Paychex Inc. (PAYX)
  • Pier 1 Imports (PIR)
  • Rite Aid Corp. (RAD)
  • Red Hat Inc. (RHT)
  • Scholastic Corp. (SCHL)
  • TIBCO Software (TIBX)
  • Winnebago Industries (WGO)

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Friday, Dec. 20  

  • BlackBerry Inc. (BBRY)
  • The Finish Line (FINL)
  • CarMax Inc. (KMX)
  • Walgreen Co. (WAG)

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