About two weeks ago, the stock market managed to pull out of its nosedive. We doubt very seriously that anyone who was watching the stock market open down over 1,000 points on Aug. 24 thought it would finish up for the week.
Last week was just the opposite, with the market initially hit by global PMI data that revealed not only further economic contraction in China, but a slowing U.S. economy as well. Comments from the Beige Book along with other data released filled in a growing picture the Fed would likely wait on moving interest rates up at its next FOMC meeting on Sept. 16-17.
Then Friday we received the August employment report that hit the market like too much lighter fluid on a charcoal barbecue with its 5.1% unemployment rate. This headline figure, the last such report it will view before the FOMC meeting, turned up the flames of uncertainty about what the Fed will do. When we parse the data, however, we once again see Wall Street overreacting, much the way it did 10 trading days ago. To us, it's pretty simple: When we look at more people leaving the workforce than the number of jobs being added, it become pretty obvious the drop in the unemployment rate was due to "bad math."
Looking at other indicators -- Gallup and parts of the PMI and ISM data -- helps paint a truer picture, as does payroll-to-population and labor force participation rate data of the jobs market. While politicians in Washington, D.C., will point to the falling unemployment rate as being due to "progress," it couldn't be further from the truth.
As far as China goes, we're only now starting to hear about the "China Ripple" -- and no, it's not the latest flavor from Ben & Jerry's -- the ripple effect from the accelerating China slowdown. Australia's growth came in at half of expectations and now German factory orders dropped a larger-than-expected 1.4% in July compared to the previous month, dragged down by flagging foreign demand. In our opinion, there are too many data points -- better known as reasons -- that make it hard to see Janet and the Feds pulling the rate trigger amid an increasingly uncertain environment.
Turning to the week ahead, we have a shortened week thanks to the Labor Day holiday. Ah yes, the unofficial end of summer and back-to-school shopping all rolled into one. The end of summer, something even Phineas and Ferb eventually had to contend with, and the return to work mode happen with just three weeks left in the quarter. Remember, we've been warning about the looming need to revise economic and business forecasts given the dramatic slowing in China and the continued one in the U.S. economy. We've started to see some of this, like Goldman Sachs (GS) lopping several points off its China growth forecast, but more revisions are on the horizon.
From an economic data vantage point, the three reports we will be focusing on will be the Labor Markets Conditions Report and the JOLTS Job Openings report (a Hawkins favorite), to fill in the edges of the August employment report with perspective in the hopes of getting an even clearer view. Later in the week, we have the August PPI reading, which should be rather unsurprising given the move during the eighth month of 2015. The key aspect of the PPI report will be the degree prices moved over the previous 12 months -- a gauge the Fed will examine as part of its mandate for stable prices.
Turning to corporate earnings, we have several to watch, including Kroger (KR) to see if the company's picking up lost share from Whole Foods (WFM), Fresh Market (TFM) and Sprouts Farmers Market (SFM). Following disappointing results from several retailers, including Gap (GPS), we have Men's Wearhouse (MW), Pacific Sunwear (PSUN) and Zumiez (ZUMZ). All three of these stocks have been on a negative slope line (ah algebra and quadratic equations!) and investors may want to see if the businesses are set to turn. (Pacific Sunwear is part of TheStreet's Stocks Under $10 portfolio.)
Speaking of turning and lunging, LuluLemon (LULU) also reports its quarterly results this week. LULU shares have recovered over the last year, but have been essentially range bound since January; as we head into fall, will the business merit a breakout? Versace will ponder LULU's results as he digests several doughnuts from Krispy Kreme (KKD), which also reports earnings this week.
Other companies reporting this week include:
-- Barnes & Noble (BKS): Perhaps an update on spinning out its college textbook business?
-- HD Supply (HDS) and Hovnanian (HOV): How did homebuilding and repair remodel fare in August?
Below is a more detailed look at the economic data in the week ahead. For a more complete 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 rest of your weekend and be sure to catch Hawkins on America's Morning News and 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: Sept. 7-11|
|7-Sep||Labor Day Holiday - US Markets Closed|
|8-Sep||NFIB Small Business Optimism Index|
|8-Sep||Gallup US Consumer Spending Measure|
|8-Sep||Labor Markets Conditions Index|
|9-Sep||MBA Mortgage Index|
|9-Sep||JOLTS - Job Openings|
|9-Sep||Quarterly Services Survey|
|10-Sep||Export Prices ex-ag.|
|10-Sep||Import Prices ex-oil|
|10-Sep||Natural Gas Inventories|