The market closed last Friday with two of the three major indices -- the S&P 500 and the Nasdaq Composite Index in the red. For the week, all three were down, with the Nasdaq Composite Index falling the most at 2.9%.
Closing out the week, on a year-to-date basis, all three were also in the red, with the Nasdaq down modestly and 6-8.5% drops for the S&P 500 and Dow Jones Industrial Average.
Those latter two indices were hit by Caterpillar (CAT), falling from Wednesday's closing price of $70.20 to finish the week at $64.98 following the news the machinery company cut its outlook for 2015 and 2016 plus announced a fresh round of layoffs.
The Fed fireworks resumed last week, even though just the week before the Fed opted not to raise interest rates at their September FOMC meeting. In her Thursday remarks, Fed Chairwoman Janet Yellen said the FOMC would likely boost rates before the end of the year given what the central bank sees as building inflation pressures.
Central to her argument was the notion that "slack in the economy has diminished to a point where inflation pressures should start to gradually build in the coming years."
Now, we've talked quite a bit potential wage pressures arising as minimum-wage hikes hit in 2016, with the effects rippling through the U.S. economy as companies contend with higher prices. But as far as slack in the economy having diminished, you have to wonder if Yellen saw last week's capacity-utilization report (which is actually produced by the Fed).
As you can see in the above chart, capacity utilization remains well below the 82-85% range that tends to coincide with price inflation. Color us skeptical that we will see a rate hike before the end of 2015.
With three trading days left in the month of September, it might be the earnings calm before the storm as we close the third quarter this week, but it will be an economic data downpour this week. Let's knock out the modest number of earnings reports so we can focus on the far greater number of economic reports.
Monday sees mountain resort and urban ski area Vail Resorts (MTN) report a seasonally weak quarter that caps its fiscal year. It's too soon to tell how the winter ski season will be and with consumers watching their spending. We'd stay on the sidelines a bit longer until we have a better sense how possible the $3.41 per share in expected earnings over the coming 12 months really is.
Tuesday has security and storage company Barracuda Networks (CUDA) report its results and while we're fans of cyber security companies, at more than 50x expected 2016 earnings or a PEG ratio of more than 1.4x, the law of gravity seems to be catching up with CUDA shares.
Costco (COST) reports its quarterly results on Wednesday, followed by spice and marinade dividend dynamo company McCormick & Co. (MKC).
Now, let's put the spotlight on the center stage that will be this week's economic data. We start off with August personal income and spending and finish with the September employment report. In between, we'll get the more detailed global PMI reports that flesh our last week's flash PMI reports as well as ISM's view on how the domestic manufacturing economy faired in September. Based on what we've seen so far, including several regional Fed reports and the flash PMI's, we would be surprised to see any meaningful month-over-month improvement in these manufacturing-related reports, but we'll be sure to keep an open mind and let the data talk to us.
Also at the start of October we'll get monthly auto and trucks sales data, which are expected to climb double digits. TrueCar projects overall industry sales will climb 13% to a seasonally adjusted annual rate (SAAR) of 17.7 million units in September, up from 16.5 million a year ago. Given its recent headline making problems, both TrueCar and Edmunds.com are calling for declines by VW brands. But those firms call for big gains by Kia, Ford Motor (F), Toyota Motor (TM) and Subaru.
Based on the findings from the ADP Employment Report that drops on Wednesday, the domestic PMI report, the ISM Manufacturing Index and Gallup's payroll to population report we'd expect some last-minute tinkering with expectations for Friday's September jobs numbers. Given the comments from Yellen above, we suspect it will be the wage data inside the September Employment Report that will get the most attention this week.
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.