After all that's happened in the markets over the last few weeks -- China's monetary policy moves and slowing economic data, to name just two -- next week brings what many have been waiting for. No, not Apple's (AAPL) big product announcements -- that was last week. No, not the final ruling on "deflategate," we've already gotten that. (Apple is part of TheStreet's Action Alerts PLUS portfolio.)
What we're talking about is the next FOMC meeting and the decision as to whether the Fed will start to hike interest rates for the first time in almost 10 years. Arguments have been put forth as to why the Fed should increase rates, such as the domestic economy continues to improve (we'd add, only by some metrics) and is far removed from the calamitous situation that required such dire action. Others warn that the strong dollar is already weighing on domestic export activity or point to the China ripple that is moving its way through the global economy and is already slowing the U.S. economy as reason enough for the Fed to hold off doing anything when it concludes its two-day meeting on Thursday. Oh yeah, per recent CPI data, there is next to no inflation.
In our view, while many, particularly those in D.C., will point to the falling unemployment rate, we and Fed Chair Janet Yellen tend to look at a variety of such indicators, which conflict with the "official" unemployment rate. We find a more comprehensive view that looks at payroll to population, labor force participation and JOLTS data offers a more sobering view. While the unemployment rate has declined, the percent of the population employed still isn't giving us much to cheer about. That employment rate and the Fed's stable-price mandate aren't exactly screaming, "Raise rates!"
The bottom line to us is this: There are several factors already retarding the growth trajectory of the domestic economy. There will be more coming in 2016 as minimum wage hikes kick in and Obamacare-related premiums move higher; both increase the cost of running a business, which makes for additional headwinds to growth. So while the Fed could boost rates next week, there are additional FOMC meetings left in 2016 at which they can do the initial hike, should the concerns mentioned above abate.
What if the Fed does raise rates next week? Odds are it will be by a small margin, some 25 basis points. Hardly an increase from the current low-to-no-rate levels that would overly impede the vector of the economy, even though it may slow the velocity in the very short term. To us, the larger question would be when would the Fed next increase rates? Like any good quarterback throwing a pass or golfer swinging a club, the follow-through in situations like this is what matters most. More on this from us next week based on what the Fed does and says.
In addition to the Fed-related hoopla, next week brings the August retail sales report, which is the first look at back-to-school spending. Given the moves by Amazon.com (AMZN) to grab this spending share, we'll be eyeing the e-tailing/non-store line closely in this report. We also have the August industrial production report, and we'd remind you to parse the data among manufacturing, utilities and mining to get a real sense as to how the manufacturing economy performed during the month. Recall that both the ISM Manufacturing PMI and new-orders figures fell month over month in August. (Amazon is part of TheStreet's Growth Seeker portfolio.)
Next up is the Consumer Price Index, which, as we alluded to above, has shown no real signs of inflation. Given the tick down in gas prices, we'd be surprised to see any meaningful month-over-month gains in the to-be-published August data. The last big piece of data before the Fed meeting results are in is August housing starts. Like the industrial production report, it's the internals of this report between single-family and multi-unit housing that matters most. In the July report, single-family housing starts were the strongest in months, which begs the question: Was it a blip or the start of something more? The data should help clue us in.
Looking at what's in store for us from an earnings perspective, we have United Natural Foods (UNFI) on tap Tuesday, Cracker Barrel (CBRL), FedEx (FDX) and Oracle (ORCL) on Wednesday, followed by Adobe Systems (ADBE) and Rite Aid (RAD) on Thursday. The FDX data are always interesting as shipment volume for it and United Parcel Service (UPS) serves as a bit of a proxy for the economy. As we cross the middle of next week, we will be halfway through September, which means just two weeks until the close of the current quarter. Companies will soon begin their quiet periods and roll up their P&L statements to see how they fared against forecast results. In other words, it's time to be on guard for earnings preannouncements.
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. 14-18
15-Sep Retail Sales
15-Sep Retail Sales ex-auto
15-Sep Empire Manufacturing
15-Sep Industrial Production
15-Sep Capacity Utilization
15-Sep Business Inventories
16-Sep MBA Mortgage Index
16-Sep Core CPI
16-Sep NAHB Housing Market Index
16-Sep Crude Inventories
16-Sep Net Long-Term TIC Flows
17-Sep Initial Claims
17-Sep Continuing Claims
17-Sep Housing Starts
17-Sep Building Permits
17-Sep Current Account Balance
17-Sep Philadelphia Fed
17-Sep Natural Gas Inventories
17-Sep FOMC Rate Decision
18-Sep Leading Indicators