On Friday afternoon I received an email alert reminding me the Dow Jones Industrial Average closed at a record high of 16,583.34, slightly above its April 30 record finish of 16,580.84. Maybe it's the analyst in me, but when I hear such the news, I don't get caught up in the euphoria. Instead I tend to think, "What's next?" For the Dow in particular, this is a basket of 30 stocks -- and I believe, along with most other professional money managers, that it is among the less important figures to watch. My preference is for the S&P 500, which better reflects the overall stock market, and is the index for which we have earnings estimates and other metrics.
The other way to view the indices is on a year-to-date basis. From this perspective, the Dow has been rather flat so far this year, while the S&P 500 is up 1.6% and the Nasdaq Composite Index is down 2.5%. Yes, 2014 is certainly shaping up to be a stock-picker's market.
On the economic front this week, retail sales and inflation data are set for release, along with other indicators on the health of the manufacturing economy and the housing industry. Yes, keeping a bead on the consumer is key, but we already have a number of metrics that point to a pick-up in the industrial and manufacturing economy.
To me, that means the two key pieces of data will be in the inflation and housing data. Given comments from such companies as Sonic (SONC), Chipotle (CMG), and considering also the year-over-year rise in gas prices, the line items to watch in the April consumer and producer price indices will be food and energy. Remember that, for some bizarre reason, these two components are excluded from the core inflation calculation even though they impact consumers in a meaningful way.
As for housing, on Thursday and Friday we're due to get the National Association of Home Builders (NAHB) Housing Market Index for May and April housing starts. Comments from Realogy and others suggest a lack of homes for sale at affordable prices, and at least some of that can be attributed to weaker-than-expected housing starts in early 2014. As the winter weather has cleared out, April's read on single-family housing starts will be the number to watch. As I shared with TheStreetTV's Brittany Umar, that report will be put-up-or-shut-up time for such homebuilders as Toll Brothers (TOL), Ryland (RYL) and KB Home (KBH).
Turning to earnings, I am rather happy to see the pace slow down after several weeks of more than 1,000 reports. Per FactSet, 454 of the S&P 500 companies have reported their quarterly results, and the blended earnings-growth rate for the March quarter is clocking in near 2.2%. Back on March 31, the expectations was for first-quarter earnings to decline 1.3% year over year.
That's the good news. The bad news is 62 companies have issued negative guidance for the current quarter -- that is, expecting numbers below analyst targets -- as compared with the 26 issuing positive guidance. Still, given that 75% of companies in the S&P 500 that have beaten the mean earnings estimate, that ratio of negative to positive could have been impacted by companies resetting the bar or sandbagging expectations.
In terms of company earnings to watch this week, we will start to hear from the retailers: Macy's (M), Fossil (FOSL), Kate Spade (KATE), J.C. Penney (JCP), Nordstrom (JWN), Wal-Mart (WMT) and Kohl's (KSS) are all set to report this week. There has been much talk about store closings by the likes of Sears (SHLD) and Penney, so you'd do well to pay attention to how those plans are progressing at Penney.
Applied Materials (AMAT) is also due to report this week, bringing semiconductor capital equipment to the forefront, and Deere (DE) is set to put the spotlight on agricultural equipment. One other earnings report to watch will be that of Gogo (GOGO), given the recent news that AT&T (T) will look to bring connectivity to air travel.
Here's a more comprehensive listing of what you can expect in the week ahead:
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Economic Calendar
Monday, May 12
- Treasury Budget (April)
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Tuesday, May 13
- Retail Sales (April)
- Import and Export Prices (April)
- Business Inventories (March)
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Wednesday, May 14
- Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
- Producer Price Index (PPI) (April)
- Crude Oil Inventories (Weekly)
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Thursday, May 15
- Initial and Continuing Jobless Claims (Weekly)
- Consumer Price Index (CPI) (April)
- Empire Manufacturing Index (May)
- Industrial Production and Capacity Utilization (April)
- Philadelphia Federal Reserve Index (May)
- National Association of Home Builders (NAHB) Housing Market Index (May)
- Natural Gas Inventories (Weekly)
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Friday, May 16
- Housing Starts and Building Permits (April)
- Michigan Sentiment Index (May)
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Earnings Calendar
Monday, May 12
- Continental Building Products (CBPX)
- DTS Inc. (DTSI)
- Everyday Health (EVDY)
- Gogo Inc. (GOGO)
- Harvest Natural Resources (HNR)
- Lifeway Foods (LWAY)
- McKesson Corp. (MCK)
- NII Holdings (NIHD)
- ParkerVision (PRKR)
- Rackspace Hosting (RAX)
- Elizabeth Arden (RDEN)
- Rick's Cabaret International (RICK)
- Tecumseh Products (TECU)
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Tuesday, May 13
- American Residential Properties (ARPI)
- CTI Industries (CTIB)
- Convergys Corp. (CVG)
- Consolidated Water (CWCO)
- Electro Scientific Industries (ESIO)
- Elbit Systems (ESLT)
- Fossil Inc. (FOSL)
- Intelli-Check (IDN)
- Trend Micro (TMICY)
- Take-Two Interactive (TTWO)
- YuMe, Inc. (YUME)
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Wednesday, May 14
- Agilent Technologies (A)
- Acxiom Corp. (ACXM)
- Coty Inc. (COTY)
- Deere & Co. (DE)
- Kate Spade & Co. (KATE)
- Macy's Inc. (M)
- Opower (OPWR)
- On Track Innovations (OTIV)
- Pinnacle Foods (PF)
- SeaWorld Entertainment (SEAS)
- SodaStream International (SODA)
- Vimpel Communications (VIP)
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Thursday, May 15
- Advance Auto Parts (AAP)
- Authentidate Holding (ADAT)
- Autodesk, Inc. (ADSK)
- Applied Materials (AMAT)
- Eagle Materials (EXP)
- Jack in the Box (JACK)
- J.C. Penney Company (JCP)
- Nordstrom Inc. (JWN)
- Kohl's Corp. (KSS)
- LGI Homes (LGIH)
- RE/MAX Holdings (RMAX)
- Tower Semiconductor (TSEM)
- Wal-Mart Stores (WMT)
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Friday, May 16
- Canadian Solar (CSIQ)
- Gas Natural (EGAS)
