We hope you've enjoyed the tail end of summer and the long weekend, because once the U.S. stock markets open on Tuesday, it'll be back to business. That's right: There'll be no more summer vacations getting in the way.
Instead, companies will not only be focused on making their third-quarter numbers, but they'll be doing so with only a handful of months left in 2014 -- the year-end sprint will soon be upon us. Because the market is closed on Monday for the Labor Day holiday, things will be a bit compressed over the next few days, and that will make for an even busier week than usual.
So where are the markets ahead of Tuesday's starter pistol? Friday's market close shut the books on August, which saw a 1.7% move in the S&P 500, bringing it to 8.4% on a year-to-date basis. By comparison, the tech-heavy Nasdaq Composite Index is up 9.7% so far in 2014, while the Dow Jones Industrial Average is lagging with a rise of only 3.2%. I'd note that Friday's close saw the S&P 500 once again break through the 2000 level despite renewed worries over the Russia-Ukraine conflict.
Candidly, given Thursday's upwardly revised second-quarter GDP figure of 4.2% (annualized) growth, I'm surprised folks didn't engage in more discussion on a possible interest-rate hike from the Federal Reserve -- but, in any case, such talk was quickly cooled by Friday's weak personal-income-and-spending report. Those figures showed the first drop in personal consumption in months, but also revealed a steep dip in disposable income. From our vantage point, it simply hammers home the recent and tepid commentary from Best Buy (BBY), Macy's (M), Target (TGT) and other retailers.
Perhaps the silver lining in the report was the continued increase in the personal savings rate, which hit 5.7% in July and marked that data point's highest level in a number of months. The numbers would suggest that more and more people are saving instead of spending -- which in our view is a good thing, given the growing amount of data that show Americans are under-saved for retirement. We'll have more on this in the coming days.
Turning to the week ahead, we'll be getting our usual boatload of data to start the month: purchasing managers indices, the U.S. employment report, August auto-and-truck sales and the next iteration of the Fed Beige Book. While indicators suggest the U.S. PMI will be solid, the market will be eyeing the quality of the eurozone data so as to gauge the likelihood of further stimulus in that region. This crop of reports is also bound to shed more light on the manufacturing economy in China -- which, per the flash PMI report, saw slower growth in output and order activity.
Meanwhile, we are sticking to our guns when it comes to the August employment report: The focus will continue to shift from the number of jobs created to wages and hours worked. Yes, job creation will still be important -- but, despite all the progress, let's remember that layoffs are continuing. For examples of this, we have to look no further than recent announcements from Microsoft (MSFT), Cisco Systems (CSCO), Deere (DE), CNH (CNHI), AGCO (AGCO), Angie's List (ANGI), Intuit (INTU) and others.
The next few months are critical to retailers -- and, as Wall Street looks to get a handle on the forthcoming results in that sector, consumer-wage and hours-worked data will be central to the conversation. If we do not see a shift from part-time to full-time employment, or modest growth in wages relative to the move in food and other prices, odds are that retailers will continue to sing a sad song this holiday season. Ahead of this Friday report, we'll be parsing Wednesday's Fed Beige Book report for any and all telltale clues.
Moving on to earnings, a mere trickle of companies are scheduled to issue quarterly results this week. Of those, Navistar (NAV) will be one to watch both as a gauge of heavy truck demand and new engine emission requirements, as well as a measure of how well the trucking industry is shifting to natural-gas engines.
Meanwhile, backlog and order trends will be the data points to watch from homebuilders Toll Brothers (TOL) and Hovnanian (HOV) in order to see if there is support for the July housing reports. Hand in hand with that, be sure to examine the trend in housing prices and the use of incentives to convert traffic to buyers. If the use of incentives is ramping up, it could mean margins are poised for a dip.
Below is more detailed look at what's coming at you in the week ahead. Be sure to check back midweek for The Corner of Wall & Main, 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.
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Economic Calendar
Monday, Sept. 1
- Labor Day Holiday -- U.S. Stock Market Closed
- HSBC China Manufacturing Purchasing Managers Index (PMI)
- Markit Eurozone Manufacturing PMI
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Tuesday, Sept. 2
- Markit U.S. Manufacturing PMI
- Institute for Supply Management (ISM) Index (August)
- Construction Spending (July)
- J.P. Morgan Global Manufacturing PMI
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Wednesday, Sept. 3
- Markit Eurozone Composite PMI
- Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
- Factory Orders (July)
- Federal Reserve's Beige Book (September)
- Auto and Truck Sales (August)
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Thursday, Sept. 4
- HSBC Emerging Markets Index
- J.P. Morgan Global Composite PMI
- Challenger Job Cuts (August)
- ADP Employment Change Report (August)
- Initial and Continuing Jobless Claims (Weekly)
- Trade Balance (July)
- Productivity (Second Quarter of 2014)
- Unit Labor Costs (Second Quarter of 2014)
- ISM Services Index (August)
- Natural Gas Inventories (Weekly)
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Friday, Sept. 5
- Employment Report (August)
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Earnings Calendar
Monday, Sept. 1
- Labor Day Holiday -- Stock Market Closed
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Tuesday, Sept. 2
- Conns (CONN)
- Kofax (KFX)
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Wednesday, Sept. 3
- Aerovironment (AVAV)
- Navistar (NAV)
- Shoe Carnival (SCVL)
- Toll Brothers (TOL)
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Thursday, Sept. 4
- Bebe Stores (BEBE)
- Ciena Corp. (CIEN)
- Cooper Cos. (COO)
- Finisar Corp. (FNSR)
- Hovnanian Enterprises (HOV)
- Infoblox (BLOX)
- Joy Global (JOY)
- Quicksilver Inc. (ZQK)
- VeriFone (PAY)
- Zumiez (ZUMZ)
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Friday, Sept. 5
- Aceto Corp. (ACET)
- Culp Inc. (CFI)
