Last week was full of economic data that pointed to an improving U.S. economy. The Institute for Supply Management's (ISM) manufacturing index was better than expected for November, and that month's auto and truck sales continued to climb on a month-to-month basis. We also finally received data on construction spending and new-homes sales, both of which delivered better October figures vs. those for September. Even the big figure for last week, the November jobs employment, was ahead of expectations. Job creation was slightly better than expected, and the report reflected a bigger drop in the unemployment rate -- to 7% from October's 7.3%.
The next several trading days will be far quieter, with less than a handful of economic data on tap. With that in mind, the two metrics to watch will be retail sales and the producer price index (PPI) for November.
Given a number of warnings and weaker-than-expected outlooks -- from Wal-Mart (WMT), American Eagle Outfitters (AEO) and a number of other companies -- November's retail-sales report is not expected to knock people's socks off. With fewer than 17 days until Christmas, retailers will be battling it out for the dollars that consumers are willing to spend, and that means a high likelihood that margins will be squeezed. Also somewhat disconcerting has been the tone regarding spending in the face of lower at-the-pump gas prices -- which are down $0.12 per gallon year over year, per the Energy Information Administration. Normally, when consumers' wallets are given a break such as this, such it translates into improved spending levels, so this bears watching further.
In terms of the PPI report, inflation has been running low. With the financial media touting an "oil boom" here in the U.S. and low-wage pressure, it would be surprising to see a meaningful pick-up in the November report. In October, most of the PPI categories showed declines, but the one area that climbed was consumer foods.
Rising food prices are nothing new, given the surges in beef prices, which has been caused by declining supplies of cattle. This is something to think about when we look at beef-centric restaurants such as Red Robin Gourmet Burgers (RRGB), McDonald's (MCD), Wendy's (WEN) and others and of course steakhouses like Del Frisco's (DFRG).
Given the relatively quiet economic week, and following last's week's upbeat economic news, I suspect we will be hearing more drum-beating on potential stimulus-taping by the Federal Reserve. As I have said before, the two questions to ponder are when will the Fed taper, and to what degree. Timing is important, but the big unknown is the degree, and I can see the stock market focusing on the first and getting surprised by second.
While the economic data will be far slower this week, the stock market is bound to zero in on a number of earnings reports as well -- including Costco (COST) and Smith & Wesson Holdings (SWHC). Many will be looking at Costco's outlook for the current quarter, and commentary on December in particular. Smith & Wesson shares have been on fire over the last month, having risen just over 9% as FBI background checks rebounded in October and November. Other company reports that I'll be listening to this week include Ciena (CIEN), Sigma Designs (SIGM) and Restoration Hardware (RH).
Here's a more detailed list for what's on tap in the week ahead:
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Economic Calendar
Monday, Dec. 9
- [No meaningful economic releases]
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Tuesday, Dec. 10
- Wholesale Inventories (October)
- Job Openings and Labor Turnover Survey (JOLTS) (October)
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Wednesday, Dec. 11
- Mortgage Bankers Association (MBA) Mortgage Index (Weekly)
- Crude Inventories (Weekly)
- Treasury Budget (November)
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Thursday, Dec. 12
- Initial and Continuing Jobless Claims (Weekly)
- Retail Sales (November)
- Import and Export Prices (November)
- Business Inventories (October)
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Friday, Dec. 13
- Producer Price Index (November)
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Earnings Calendar
Monday, Dec. 9
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Tuesday, Dec. 10
- AutoZone Inc. (AZO)
- Burlington Stores (BURL)
- Central Garden & Pet Co. (CENT)
- HD Supply Holdings (HDS)
- John Wiley & Sons (JW.A)
- The Pep Boys (PBY)
- The Pantry (PTRY)
- Smith & Wesson Holdings (SWHC)
- Toll Brothers (TOL)
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Wednesday, Dec. 11
- Costco Wholesale (COST)
- Coldwater Creek (CWTR)
- Hooker Furniture (HOFT)
- H&R Block (HRB)
- Joy Global (JOY)
- Sigma Designs (SIGM)
- Vera Bradley, Inc. (VRA)
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Thursday, Dec. 12
- Adobe Systems (ADBE)
- Ciena Corp. (CIEN)
- Hovnanian Enterprises (HOV)
- Learning Tree (LTRE)
- Lululemon Athletica (LULU)
- Men's Wearhouse (MW)
- Restoration Hardware (RH)
- Science Applications International Corp. (SAIC)
- Streamline Health Solutions (STRM)
- Quicksilver Inc. (ZQK)
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Friday, Dec. 13
- Ocean Power Technologies (OPTT)
