Once again, the Fed has spoken and it has played short-term havoc with the stock market. Even so, the major market indices all managed to finish the week in the green, leaving the S&P 500 and the Nasdaq Composite Index in positive territory year to date.
So, what exactly played roller coaster with the stock market last week?
Fed Chairwoman Janet Yellen conducted her first press conference soon after we learned the Fed continued to taper this month. Over the course of those events, we learned the Fed was dropping the unemployment rate criteria from its decision-making process. I have long been in favor of something other than the unemployment rate as a barometer of the economy because it has been dropping for all the wrong reasons. As you know, more people have been dropping out of the labor force than the number of new jobs being created.
But back to Yellen, much like last year when then-Fed-Chairman Ben Bernanke laid out a scenario under which the Fed would taper its stimulus efforts, most of Wall Street heard what they wanted to hear rather than actually listening to what was said. I think that is exactly what happened once again. Perhaps the most telling comment from Yellen touched on something that you and I already know: the economy is far from robust. And, as Yellen indicated, the Fed is looking at a wide number of economic indicators with any decisions to be data dependent. Again, just like last year, the misconstruing of Ben's commentary weighed on the stock market and that made for a buying opportunity.
One sector that was hit last week was housing and housing-related stocks. Just look at Lennar (LEN), Ryland (RYL) and others like Masco (MAS). What weighed on them was the concern over when the Fed would look to raise interest rates. That stemmed from Yellen's comment that the central bank could raise interest rates six months after ending a bond-buying program. With the current 30-year mortgage rate sitting at 4.42%, according to Bankrate.com, a modest boost could spur fence sitters into the market. Between now and when the Fed does tighten housing fundamentals will be the key driver of housing and building-product stocks. That makes this week a big one for that industry because there are several data points to be had, including new home sales for February, as well as pending home sales. We'll also get several price indicators of housing, which in my view has moved higher given the low levels of housing stock. That very combination means homebuilders will be adding to the housing stock, not the reverse.
Ahead of the housing data, Monday will bring a slew of PMI data from around the globe courtesy of Markit Economics and HSBC. With concerns over the speed of the Chinese economy, as well as many wanting to see if the European recovery is not on track, these data points will bear watching. We'll also get the latest on the U.S. economy from those research efforts, as well as February durable orders this week. Closing out the week is personal income and spending, and that means the latest look on two indicators that I track: disposable income and the savings rate.
Turning to corporate earnings, with just over a week until the close of the March quarter it will be fairly quiet. Stil, Sonic (SONC), Five Below (FIVE), McCormick (MKC) and Restoration Hardware (RH) will be some reports I'll be watching. Following Wal-Mart's (WMT) move into video game trade-ins, commentary from GameStop (GME) later this week when the company issues its quarterly results could be illuminating.
Here's a more detailed look at what's on tap in the week ahead.
Economic Calendar
Monday, March 24
HSBC China Flash Manufacturing PMI
Markit Eurozone Flash Composite PMI
Markit US Flash Manufacturing PMI
Tuesday, March 25
Case-Shiller 20-city Index (January)
FHFA Housing Price Index (January)
Consumer Confidence (March)
New Home Sales (February)
Wednesday, March 26
MBA Mortgage Index (Weekly)
Durable Orders (February)
Crude Inventories (Weekly)
Markit US Flash Services PMI
Thursday, March 27
Initial & Continuing Jobless Claims (Weekly)
GDP - Third Estimate (4Q 2013)
Pending Home Sales (February)
Natural Gas Inventories (Weekly)
Friday, March 28
Personal Income & Spending (February)
PCE Prices - Core (February)
Michigan Sentiment Index - Final (March)
Earnings Calendar
Monday, March 24
Luby's (LUB)
Sonic Corp. (SONC)
Tuesday, March 25
Carnival Corp. (CCL)
CTI Industries (CTIB)
Five Below, Inc. (FIVE)
HD Supply Holdings (HDS)
McCormick & Co. (MKC)
Walgreen Co. (WAG)
Wednesday, March 26
Constellation Energy Partners (CEP)
Lindsay Manufacturing (LNN)
Movado Group (MOV)
Phillips-Van Heusen Corp. (PVH)
Steelcase Inc. (SCS)
Thursday, March 27
Accenture Ltd. (ACN)
Aehr Test Systems (AEHR)
Fred's Inc. (FRED)
GameStop Corp. (GME)
Lululemon Athletica (LULU)
On Track Innovations (OTIV)
Paychex Inc. (PAYX)
Restoration Hardware Holdings (RH)
Red Hat (RHT)
Winnebago Industries (WGO)
Friday, March 28
Blackberry Ltd. (BBRY)
The Finish Line (FINL)
