As actor Matthew McConaughey would say, "Alright, alright, alright." The Fed did not raise rates and it looks like that group of central bankers is likely to hold off raising interest rates until early 2016 at the earliest. On the one hand, it's nice to have our views validated by the Fed, but it also raises concern that we'll be in the Zero Interest Rate Policy (ZIRP) Zone (say "ZIRP Zone" several times really fast and you may be mistaken for Bill the Cat of "Bloom County" fame) for that much longer, and that's not likely to be a good thing.
Color us cynical, but with the global economy slowing and the potential risk of inflation coming in 2016 -- unlike Washington, we try to think things through and that leaves us pondering higher prices as minimum wage hikes roll into cities and towns -- we could have two of three stagflation conditions on our hands. We left out high unemployment because of the "falling" unemployment rate, but in our view too many other jobs-related indicators tell a very different story. More on that in the coming weeks and months, but it could mean the Fed may indeed be residing at the Hotel California.
Fed Chairperson Janet Yellen discussed the current absence of inflation in her Federal Open Market Committee press conference remarks on Thursday afternoon, but with the concerns that down the road inflation will return to the Fed's 2% target rate, we will be giving more than a passing perusing of the Atlanta Fed Business Inflation Expectations for September when it drops on Monday. According to the August report, surveyed firms expected 1.8% inflation over the coming year.
As we move well into the second half of the month, we will also be watching for the regional Fed reports. Last week we had sharp misses in both the Empire Manufacturing Report and the Philly Fed Index, with the Empire Manufacturing Report in the red to the tune of double digits for the second consecutive month. The Philadelphia Fed manufacturing index joined its cousin index in a trip downtown into the red zone for September as it fell to negative 6 from positive 8.3 in August. Economists were expecting a reading of 5 according to MarketWatch. This week we'll be seeing if the negative trend continues with the Richmond and Kansas City regional reports.
Also on the docket are Durable Orders and New Home Sales for August, as well as the quarterly Corporate Profits report for the June quarter. Given the upward adjustments to GDP for the second quarter of 2015 (and yes, we get the third and final print this Friday), we expect Corporate Profits for the quarter to be upped from the original $47.5 billion increase reported on Aug. 27. How big that upward revision will be remains to be seen, and the same goes for corporate spending during the period.
The big kahuna next week will be the flash Purchasing Managers Index readings for major geographies that hit the tape on Wednesday. Did the contraction worsen in September for China? Did that contraction ripple further into the eurozone's net exports? Did the U.S. continue to slow during the month? These reports will give us the first look at that activity for the last month of the third quarter. Expect forecasts and estimates for the quarter to come under sharpened pencils once that flash data hits.
Normally at this point, we segue to key earnings reports to be had in the week ahead, and we'll get to that in a minute or two, but first we wanted to point out that this week we enter the corporate "quiet period," which means investor relations folks and financial officers will not pick up the phone or return emails in order to avoid saying anything about the soon-to-be-closed September quarter. It also means that it's time to be on guard for negative preannouncements. Remember that when they hit, and given the picture of the global economy in August and what we've heard thus far in September, it's hard not to expect at least some of them, consider the ripple effects on suppliers and what the negative news could mean for competitors.
OK, so which companies are on tap this week and in our view worth listening to?
Homebuilder Lennar (LEN) will be one of the first looks at housing and how the public homebuilders faired over the last few months. In many ways it could set the tone for what investors hear over the coming weeks.
Nike (NKE) will offer not only its take on the booming athleisure and related athletic wear market when it reports its results this week, but also given its international exposure, many investors -- including us -- will be sniffing around its comments about and expectations for the U.S. dollar.
We have a few food companies serving up their results, including ConAgra (CAG), Darden Restaurants (DRI) and General Mills (GIS). Are consumers eating out or at home? Has the shift to what we call "food with integrity" accelerated? These companies should offer some insight.
Other quarterly results worth noting this week include CarMax (KMX), Pier One (PIR) and Blackberry (BBRY).
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, check out 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: Monday, Sept. 21, through Friday, Sept. 25
21-Sep Existing Home Sales
21-Sep Atlanta Fed Business Inflation Expectations
22-Sep FHFA Housing Price Index
22-Sep Richmond Fed Manufacturing Index
23-Sep PMI Manufacturing Index Flash - China
23-Sep PMI Manufacturing Index Flash - Eurozone
23-Sep MBA Mortgage Index
23-Sep PMI Manufacturing Index Flash - USA
23-Sep Crude Inventories
24-Sep Initial Claims
24-Sep Continuing Claims
24-Sep Durable Orders
24-Sep Durable Goods-ex transportation
24-Sep Chicago Fed National Activity Index
24-Sep New Home Sales
24-Sep Kansas City Fed Manufacturing Index
24-Sep Natural Gas Inventories
25-Sep GDP -- Third Estimate
25-Sep GDP Deflator -- Third Estimate
25-Sep Corporate Profits
25-Sep Michigan Sentiment -- Final
Tuesday CAG, CCL, DRI, GIS, KMX,
Thursday BBBY, NKE, PIR, SCHL
Friday BBRY, FINL