If you're like us, you are all bundled up amid frigid temperatures that have you yearning for spring, or at least a quick trip to warmer weather, as you get ready for the trading week ahead. Versace had to resort to an electric blanket to keep warm, while Hawkins was reduced to snuggling up with two cashmere-coated hot water bottles -- shout-out to Restoration Hardware (RH)!
In many respects, the continued climb higher in the stock market last week -- particularly the Nasdaq Composite Index, which handily outpaced the other major market indices -- came on the back of month-over-month declines in several regional Fed manufacturing surveys and single-family housing starts. Exiting the week, the S&P 500 stood at a whopping 17.5x 2015 earnings per share, which is slated to grow less than 3%, per FactSet data. Can you feel gravity tapping you on the shoulder?
What drove this upward move? Surely not the Greek exit conversation that runs the risk of crippling the European Central Bank's political clout, but rather the Fed's January FOMC minutes, in which monetary policy queen Janet Yellen and her court once again stuck to their dovish view and told us "it can be patient in beginning to normalize the stance of monetary policy."
This was rather surprising given the somewhat upbeat opening remarks, but if you look at the language -- filled with "moderate," "advancing," "expanding" -- nowhere is the Fed articulating a "robust acceleration" in the economy. If anything, this usually economically optimistic bunch may have taken off their rose-colored glasses for a minute or two when it was said, "The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced."
Tracing back the last few months of data, we've seen slower growth in manufacturing, consumer spending and other sectors. After assessing the impact of falling oil prices, oil companies have announced layoffs and canceled projects. We've also seen the impact of the severe winter weather, which will no doubt take a bite out of the economy. As Versace is fond of saying, put it all in the investing cocktail shaker and when it's poured out it's sure to look like the current quarter will be slower than the December quarter. In other words, we were not surprised by the Fed's inaction, nor were we surprised by the rebound in higher-dividend-yielding stocks that followed.
The Fed-led conversation will continue this week with Yellen's two-day Senate testimony. We expect she will offer more details on the recent decision, but at the same time we suspect every Elmer Fudd and Daffy Duck on Wall Street will parse her words to determine if we are nearing "hike season" or "no-hike season." As we've said before, the oil-led drop in inflation gives the Fed much room to maneuver, as it's well off its 2% inflation target, while recent domestic economic data remind Versace of the Springsteen song "One Step Up, Two Steps Back."
The big question will be whether the Fed is tracking for a June rate hike, but in our view the answer remains a no, with the soonest upward move maybe in the back half of 2015. If Yellen were a parrot, you'd expect more "<squawk> data dependent <squawk> data dependent" and nothing more.
Ranked second in importance this week, at least in our view, will be the spate of earnings from consumer-led and retail companies. The data show that consumers did not pry open their wallets in December and January, and that means there will be winners, losers and margin pressures to watch. Macy's (M), Steve Madden (SHOO), Target (TGT), the TJX Companies (TJX), JC Penney (JCP), Chico's FAS (CHS), Gap (GPS), Kohl's (KSS), the often-not-fitting but TV-show-embracing L-Brands (LB) and Ross Stores (ROST), among others, are on the docket. Water also takes notice this week with American Water Works (AWK) and Aqua America (WTR) reporting quarterly results.
Another rootin'-tootin' pair to watch will be Sturm Ruger (RGR) and Taser International (TASR), following solid results from Smith & Wesson (SWHC) and post-Ferguson fallout that has police forces embracing body cameras and other solutions. Two of our hot buttons -- higher protein and dairy prices for Versace, housing for Hawkins -- will be addressed this week with earnings from Del Frisco's (DFRG), Papa John's (PZZA), Sanderson Farms (SAFM), Domino's (DPZ), Toll Brothers (TOL) and Lumber Liquidators (LL).
Other reports that investors will focus on include Salesforce.com (CRM), Sodastream (SODA), Gogo (GOGO), Bob Lang's favorite, Monster Beverage (MNST) and Bill Ackman's love-to-hate-it Herbalife (HLF). With a few hundred companies reporting this week, be sure to check the larger list below.
Switching gears, the economic coloring book should see itself get filled in with greater detail this week given the rash of data on hand. Several regional Fed manufacturing reports are due, as is January new and existing home sales. Midweek, we get the January reading for CPI, no shocker with this one given fallen gas prices, and durable orders (remember to focus on core capital goods!). Ending the week, we'll get the first revision to December quarter GDP. We expect a cooler number from the initial 3.2% print owing to downward revisions and lowered expectations for exports, inventories and residential construction in the quarter.
Despite the go/no-go with Greece, we'd note a pickup in Markit's Flash Eurozone PMI for February as it "hit a seven-month high," but with manufacturing levels that are little changed. We'll look for more details (orders, backlogs) in the full report before jumping into a pool like a drunken teenager looking for a good time only to wake up and wonder how they got they there.
Below is a more detailed look at what's coming in the week ahead. Check back midweek for our column, in which we will dish on the first half of the trading week and other key matters and thoughts, as well as how to play it all.
|Economic Calendar - Monday, Feb 23 - Friday, Feb 27|
|23-Feb||Chicago Fed National Actiivty Index||Feb|
|23-Feb||Existing Home Sales||Jan|
|24-Feb||Case-Shiller 20-city Index||Dec|
|24-Feb||Fed Chairwoman Janet Yellen||Senate Testimony|
|24-Feb||Richmond Fed Manufacturing Index||Feb|
|25-Feb||MBA Mortgage Index||Weekly|
|25-Feb||New Home Sales||Jan|
|25-Feb||Fed Chairwoman Janet Yellen||Senate Testimony|
|26-Feb||Durable Goods ¿ex transportation||Jan|
|26-Feb||FHFA Housing Price Index||Dec|
|26-Feb||Kansas City Fed Manufacturing Index||Feb|
|26-Feb||Natural Gas Inventories||Weekly|
|27-Feb||GDP - Second Estimate||Q4|
|27-Feb||GDP Deflator - Second Estimate||Q4|
|27-Feb||Michigan Sentiment - Final||Feb|
|27-Feb||Pending Home Sales||Jan|
|Earnings Calendar - Monday, Feb 23 - Friday, Feb 27|
|Monday, February 23|
|AXL||Amer Axle & Mfg|
|DISH||Dish Network Cp|
|Tuesday, February 24|
|BBRG||Bravo Brio Rstr|
|BGFV||Big 5 Sporting|
|CMCSA||Comcast Corp A|
|COT||Cott Corp Que|
|FSLR||First Solar Inc|
|LQ||La Quinta Hldgs|
|SAM||Boston Beer Inc|
|SMSI||Smith Micro Sof|
|WBMD||Webmd Health Cp|
|Wednesday, February 25|
|AWK||Amer Water Work|
|DLTR||Dollar Tree Inc|
|EE||El Paso Elec Co|
|NLY||Annaly Cap Mgmt|
|PZZA||Papa Johns Intl|
|SFM||Sprouts Fmr Mkt|
|TJX||Tjx Cos Inc New|
|Thursday, February 26|
|AMCX||Amc Networks- A|
|CHS||Chicos Fas Inc|
|CWT||Calif Water Svc|
|DDD||3d Systems Corp|
|FARO||Faro Tech Inc|
|JCP||Penney (jc) Inc|
|LB||L Brands Inc|
|LYV||Live Nation Ent|
|PLKI||Popeyes La Ktch|
|TASR||Taser Intl Inc|
|TD||Toronto Dom Bnk|
|TPC||Tutor Perini Cp|
|TUMI||Tumi Hldgs Inc|
|TWI||Titan Intl Inc|
|ZBRA||Zebra Tech Cl A|
|Friday, February 27|
|DFRG||Del Friscos Rst|
|MAIN||Main Street Cap|
|WTR||Aqua Amer Inc|