The confirmation of next Federal Reserve Chairperson Janet Yellen, and the attendant strong prospects for continued easy-money policies, fueled the Dow Jones Industrial Average to break through and close above the 16,000 ceiling this week. We have to remember, however, that market index comprises only 30 stocks. A far, far better measure of the stock market can be found in the S&P 500, the accepted barometer by most if not all institutional money managers, as well as myself.
The Federal Open Market Committee, in a press release regarding its most recent meeting, indicated that the domestic economy continues to expand at a "moderate pace." It says job creation has improved, but that unemployment remains elevated and inflation has been running below expected levels.
Those of us who watch the market and the economy every day, like you and me, did not need that report to clue us in to what is going on in the real world. But, in any case, given Janet Yellen's recent testimony that the Federal Reserve needs to do more to help the economy get back on a growth trajectory, I continue to believe that stimulus tapering will be off the table until 2014. There is also the possibility that 2014 may see a shift in how the Fed looks to implement its stimulative efforts. This bears watching, and between now and early 2014 any better-than-expected economic data is bound to stoke tapering fears and drive market volatility higher.
Potential tapering aside, nerves on Wall Street are increasingly on edge given some of the valuation multiples out there, and we are now seeing the popping of some of the recent mini-bubbles -- in cloud technology and retail stocks, for example -- as business fundamentals fall short of valuations. It's not just institutional investors that are getting jumpy. For the week ended Nov. 20, the American Association of Individual Investors' sentiment survey saw a 2-point rise in bearishness to 30%, and a near 5-point drop in bullishness to 34.4%. The largest ratio of responses, at 36.1%, was for a neutral perspective on the market.
In the week ahead, which is a short one given the Thanksgiving holiday, we'll still be getting earnings reports as well as playing catch-up with several streams of economic data. It's a big one for housing, as we're due to get not only pending home sales, but also multiple months' worth of housing and building-permit data. We'll also get the latest read on durable orders before domestic stock markets close for Thanksgiving. This happens to be my favorite holiday: The way I see it, everyone has something for which to be thankful.
While the rate of earnings reports has slowed since a few weeks ago, there are several on the docket this week. Monday sees one of Carl Icahn's positions -- Nuance Communications (NUAN) ¿ issuing quarterly results. With new voice interface services from Comcast (CMCSA), as well as recent product updates at Nuance, the call should be an interesting one. We'll also hear from Hewlett-Packard (HPQ) this week, which should also be intriguing given share gains by Lenovo in the all-but-dead personal computer market.
Away from those names, we're due to hear from a pair of shoe companies -- Brown Shoe (BWS) and DSW (DSW) -- as well two jewelry companies, Tiffany (TIF) and Zale (ZLC). There also a fair amount of retailers that bear watching given weak reports from several retailers last week: Guess (GES), The Children's Place (PLCE) and Chico's FAS (CHS).
Here's a more detailed look at what's on tap in the week ahead:
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Economic Calendar
Monday, Nov. 25
- Markit U.S. Flash Services Purchasing Managers Index (PMI)
- Pending Home Sales (October)
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Tuesday, Nov. 26
- Housing Starts (September and October)
- Building Permits (September and October)
- Case-Schiller 20-city Index (September)
- Federal Housing Finance Agency (FHFA) Housing Price Index (September)
- Consumer Confidence (November)
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Wednesday, Nov. 27
- Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
- Initial and Continuing Jobless Claims (Weekly)
- Durable Orders (October)
- Chicago PMI (November)
- Michigan Sentiment - Final (November)
- Leading Indicators (October)
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Thursday, Nov. 28 - Thanksgiving Holiday
- [U.S. Stock Market Closed]
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Friday, Nov. 29
- [No major economic indicators]
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Earnings Calendar
Monday, Nov. 25
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Tuesday, Nov. 26
- Analog Devices (ADI)
- Barnes & Noble (BKS)
- CSR Plc. (CSRE)
- Infoblox (BLOX)
- Brown Shoe Company (BWS)
- Chico's FAS (CHS)
- DSW Inc. (DSW)
- Dycom Industries (DY)
- Hewlett-Packard (HPQ)
- Hormel Foods (HRL)
- LDK Solar (LDK)
- Movado Group (MOV)
- The Children's Place (PLCE)
- Pall Corp. (PLL)
- Tiffany & Co. (TIF)
- Tivo Inc. (TIVO)
- Zale Corp. (ZLC)
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Wednesday, Nov. 27
- Astro-Med (ALOT)
- Acorn International (ATV)
- Coldwater Creek (CWTR)
- Guess Inc. (GES)
- Magal Security (MAGS)
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Thursday, Nov. 28 - Thanksgiving Holiday
- [U.S. Stock Market Closed]
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Friday, Nov. 29
