Some of the top headlines for Monday, September 15, ran along these lines:
- Bloody Urban Outfitters (URBN) Kent State shirt has no impact on stock price
- Apple's (AAPL) watch is just a watch, so you don't need one
- iPhone 6 pre-orders have EXPLODED, here is where you could buy one
- Alibaba IPO fever has taken hold, but your mom and dad will get no piece of action
- Microsoft (MSFT) buying Minecraft is amazing
- 47 ways some guy named Thomas Lee will ruin Wall Street with a new research boutique
As you can see, all very important stuff, right? Wrong! I detest the period in between earnings seasons, as it leads to wacky, borderline meaningless stories that derail the attention of investors. Where should the attention of investors be squarely placed right now, other than the looming Fed meeting and its likely languages twists and turns? Preparing for the next earnings season, which will begin when Dow component Nike (NKE) reports on Sept. 25 after the close.
To that end, I reckon you best start drilling down into the data emanating from China. Review loan defaults. Review property prices in tier-one cities. Review wage gains relative to inflation gains this year. And, of course, save notes on all of the industrial data that hits the wires late in the evening. China's economy is slowing, the market doesn't seem to care, meaning you could be surprised if not prepared well in advance of the upcoming earnings season.
Peep out some of my notes to get a feel for what to look out for. For my primary area of coverage, consumer, I am using the earnings call from Nike to listen on whether there have been unexpected inventory increases in China. Inventory bulges in China hampered Nike in 2013 as the economy cooled; it took about three full quarters for sales to rebound in Greater China, gross margins to stabilize, and earnings call commentary to sound less dire.
Here is the setup to what could be some cautious views from execs on the outlook for China for the remainder of 2014 and early part of 2015. Industrial production growth in China for August slowed to the worst rate since 2008, according to Bloomberg, with all sectors but utilities showing sequential deceleration, led by automobiles. Chinese industrial output expanded by 6.9% in August, some two percentage points shy of the Bloomberg consensus forecast.
The economic dread has not been isolated to areas like manufacturing, infrastructure, and property investment; even power output in China increased the least in 14 months in August, suggesting that a government that is less supportive of economic stimulus in the county since June has taken its collective toll.
Both urban and rural retail sales growth have gained by slower rates going back to May of this year -- in August, urban retail sales rose by 11.8%, below July's 12.1% pace, while rural retail sales expanded by 12.8% compared to a 13.2% increase last month.
- New products from Skechers (SKX) showing very well in major retailers. Stock continues to move higher. New products are drastically lighter, the colors on trend, and positioning on retail shelves has been strong -- in a Macy's (M), for example, Skechers were positioned next to Nike.
- Starbucks (SBUX) shares have underperformed the major indices pretty badly in 2014. I don't like how the stock is acting; it could be starting to price in moderating comp growth from China (see above).
- Mildly disturbed (though I get it, given the company's strong two-year performance) that shares of Home Depot (HD) have not pulled back more post data breach news. I view this as a reason to be a bit more defensive on the name.
I hope you read what I wrote last week on Best Buy (BBY); the stock continues to trade higher post Apple product news. It is up 5.7% since the September 9 Apple note.