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  1. Home
  2. / Investing
  3. / Consumer Discretionary

The Week Ahead: Let's All Catch Our Breath After Last Week

We may be easing toward Labor Day, but there's still plenty going on.
By CHRIS VERSACE AND LENORE HAWKINS Aug 23, 2015 | 05:00 PM EDT
Stocks quotes in this article: EWG, LOW, M, WMT, BBY, DSW, ANF, CHS, EXPR, GES, TIF, AERO, WSM, MOV, AAPL, AVGO, PLL, SWHC

What a week it was!

Last week was one of the worst for the S&P 500 in recent history. The "fun" started on Monday with a huge drop into contraction territory for the Empire Manufacturing Index for August. Even though single-family housing starts surged in July, falling prices for oil and other commodities fanned the flames of global slowdown fears. Add China's recent devaluation of the yuan to the latest FOMC minutes -- which revealed the Fed remains not only split on interest rate hike timing but also concerned over the strong dollar's impact on inflation and domestic growth -- and you've got serious market jitters.

As if that wasn't enough, articles touting the Fed's concern over the lack of inflation made the rounds, which was hardly surprising to those of us who have been tracking PPI and CPI data. Overall consumer prices rose just 0.2% over the 12 months ending in July, according to the latest CPI report, which is well below the 2% annual pace the Fed considers healthy.

Capping off the on-again growth concerns, China's August Flash PMI Manufacturing figure fell to the lowest level in 77 months! Based on the accelerated drop in new order and new export order activity during August, despite the additional stimulus efforts, we will not be seeing a pronounced pickup in activity next month. As we've seen here in the U.S. and even with the ECB's efforts in Europe early this year, there is typically a lag between stimulus and increased activity.

At 54.1, the August Flash Composite PMI for the eurozone signaled that the economy remains solidly in expansion territory. Driving factors include a pickup in Germany -- a positive for shareholders of iShares MSCI Germany Index Fund (EWG) -- and "increased levels of incoming new work, including stronger growth of new export orders at manufacturers," thanks to the weak euro. We see the latter as part of China's strategy with the yuan to help reverse the trajectory on its contracting economy. As they say, imitation is the sincerest form of flattery, and somewhere Ben Bernanke must be chuckling to himself.

Here at home, the August Flash PMI came in at 52.9 -- the lowest level since October 2013 -- and continues the trend of slower growth over the last few months. More data to think Interplanet Janet Yellen and the Fed will hold off on a September rate hike.

Turning to the week ahead, as we enter the last two weeks before Labor Day weekend, the odds are pretty high we'll see trading volumes tick down over the coming 10 trading sessions. Some may be shopping before the return to school, but odds are most will be trying to cram in the last few beach and pool days, as we aim to do!

Following last week's disastrous August Empire Manufacturing Index reading, several other regional Fed reports are on tap this week, including Chicago, Richmond and Kansas City. Given the magnitude of the Empire contraction, these reports will be more scrutinized than usual.

Most of the other data on tap over the coming five days is rather rear-view-mirror in nature with an emphasis on July. From new home sales and durable orders to pending home sales and one that we track closely, personal income and spending. We also have the second look at 2Q 2015 GDP, and while many will look at the revision relative to the initial print of 2.3% and what was behind that rejiggered figure, we'll be more focused on what it means compared to this quarter. As of last week, the Atlanta Fed's GDP Now reading for the current quarter stands at 1.3%. That's a slowdown in velocity with a downward vector, or more simply put, once again the domestic economy is slowing. Notice our lack of surprise.

The last two days of the week will no doubt be Fed-heavy in terms of focus because of the annual Jackson Hole Symposium. Each year since 1978, the Federal Reserve Bank of Kansas City has sponsored a symposium on an important economic issue facing the U.S. and world economies. Given articles that ran last week hinting at the Fed's concern over elusive inflation, the focus this year is "Inflation Dynamics and Monetary Policy." A better sense of what specific topics will be discussed will be available when the Kansas City Fed publishes the program details Thursday evening.

Toward the end of a reporting cycle with a noteworthy level of misses for retailers, from Lowe's (LOW) to Macy's (M) to Wal-Mart (WMT), we've got more on the hook with Best Buy (BBY), DSW (DSW), Abercrombie (ANF), Chico's FAS (CHS), Express (EXPR), Guess (GES), Tiffany (TIF) and Aeropostale (AERO) as well as the Hawkins favorite for getting messy in the kitchen, Williams Sonoma (WSM).

Outside the world of retail, Movado Group (MOV) may shed some light on the competitive environment for smart watches as well as the long-term impact on its business. Speaking of smart watches and other Apple (AAPL) products, supplier Avago Technologies' (AVGO) outlook will be watched for any hint on product ramps ahead of Apple's early September event. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)

We also have industrial company Pall (PLL), and given the trends in domestic manufacturing and industrial production of late, Pall's outlook could offer some clarity. While not commonly thought of as a manufacturing company, Smith & Wesson (SWHC) should be gearing up for the fall hunting season. While NICS firearm background checks performed by the FBI were basically flat year over year in April, solid growth was seen in May, June and July.

Below is a more detailed look at the economic data in the week ahead. For a fuller list of corporate earnings that will be reported over the next five days, click here to view The Street's weekly earnings calendar.

Enjoy the weekend and be sure to catch Lenore Hawkins Monday on America's Morning News. Check back for our midweek column, in which we will dish on the first half of the trading week and other key matters and thoughts. Then finish off next week as Versace has his turn on America's Morning News each Friday.

Economic Calendar: Aug. 24-28
 


Date Release
24-Aug Chicago Fed National Activity Index
25-Aug Case-Shiller 20-city Index
25-Aug FHFA Housing Price Index
25-Aug New Home Sales
25-Aug Consumer Confidence
25-Aug Richmond Fed Manufacturing Index
25-Aug State Street Investor Confidence Index
26-Aug MBA Mortgage Index
26-Aug Durable Orders
26-Aug Durable Goods ¿ex transportation
26-Aug Crude Inventories
27-Aug Jackson Hole Symposium
27-Aug Initial Claims
27-Aug Continuing Claims
27-Aug GDP - Second Estimate
27-Aug GDP Deflator - Second Estimate
27-Aug Pending Home Sales
27-Aug Natural Gas Inventories
27-Aug Kansas City Fed Manufacturing Index
28-Aug Jackson Hole Symposium
28-Aug Personal Income
28-Aug Personal Spending
28-Aug PCE Prices - Core
28-Aug Michigan Sentiment - Final
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At the time of publication, Versace and Hawkins had no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Consumer Discretionary

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