Economic reports for the week include:
Mon. - Construction Spending, ISM Manufacturing/Prices Paid
Tues. - Factory Orders, FOMC Rate Decision, Vehicle Sales
Wed. - ISM Non-Manufacturing
Thur. - 1Q Non-farm Productivity, 1Q Unit Labor Costs, Initial Jobless Claims
Fri. - Unemployment Rate, Average Hourly Earnings, Change in Non-farm Payrolls, Consumer Credit
Some of the more noteworthy companies that release quarterly earnings this week are:
Mon. - Avon Products(AVP), Electronic Data Systems(EDS), Tyson Foods(TSN)
Tues. - Caremark Rx(CMX), Electronic Arts(ERTS), Emerson Electric(EMR), Marsh & McLennan(MMC), MBIA(MBI), Maxim Integrated(MXIM), Transocean Inc.(RIG), Tyco Intl.(TYC), Veritas Software(VRTS)
Wed. - Cigna(CI), Duke Energy(DUK), IAC/InterActiveCorp.(IACI), Time Warner(TWX), Univision Communications(UVN), Whole Foods Market(WFMI)
Thur. - CVS Corp.(CVS), EchoStar Communications(DISH), Gillette(G), McAfee(MFE), MCI Inc.(MCIP), McKesson(MCK)
Fri. - Berkshire Hathaway(BRK/A)
Other events that have market-moving potential this week include:
Mon. - Deutsche Bank Health Care Conference, Bear Stearns Aerospace/Defense Conference
Tue. - GM/F Sales Conference Call, Banc of America Basic Industries Conference, Merrill Tech Gathering Conference, Deutsche Bank Health Care Conference
Wed. - Banc of America Basic Industries Conference, JP Morgan Gaming & Lodging Conference, Morgan Stanley Healthcare Conference, Merrill Tech Gathering Conference, Deutsche Bank Health Care Conference
Thur. - Morgan Stanley Healthcare Conference, INTC Analyst Meeting, Morgan Stanley Media & Communications Conference, QCOM Analyst Meeting, SEBL Analyst Meeting, Fed's Greenspan speaks, Fed's Moskow speaks, Fed's Olson speaks
Fri. - Morgan Stanley Healthcare Conference, Morgan Stanley Media & Communications Conference
BOTTOM LINE: I expect US stocks to finish the week higher on bargain hunting, falling energy prices, short-covering, good earnings reports, less hawkish Fed comments and low long-term interest rates. However, if the Fed fails to acknowledge the recent weakening in some economic data points, stocks will likely remain mired in their recent trading range. The combination of the Fed hinting at a pause in the rate of hikes and oil moving back to the mid-$40s could push stocks substantially higher. While I am very confident we have seen the highs in oil for this cycle, I am not ruling out a countertrend rally over the next few weeks. Investor sentiment is still near levels normally associated with meaningful market bottoms. I continue to expect the second half of the year to be much better for US equities than the first half as inflation decelerates, commodities prices fall, long-term interest rates remain low, low valuations tempt investors, growth accelerates, the US dollar remains firm, employment continues to improve, consumer sentiment strengthens and merger activity continues. Homebuilder, Retail, Biotech, Airline, Financial, Internet and Gaming shares should outperform in the second half of the year, given my outlook. My trading indicators are still bearish and the Portfolio is 100% net long heading into the week.
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