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Weekly Outlook

There are some important economic reports and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - Empire Manufacturing, Net Foreign Security Purchases, NAHB Housing Market Index
Tues. - Producer Price Index, Housing Starts, Industrial Production
Wed. - Consumer Price Index
Thur. - Initial Jobless Claims, Leading Indicators, Philly Fed.
Fri. - None of note

Some of the more noteworthy companies that release quarterly earnings this week are:

Mon. - Agilent(A), BMC Software(BMC), Lowe's(LOW), Limited Brands(LTD)
Tues. - Applied Materials(AMAT), Barnes & Noble(BKS), Deere & Co.(DE), Dick's Sporting Goods(DKS), Hewlett-Packard(HPQ), Home Depot(HD), JC Penney(JCP), Nordstrom(JWN), Sears Holdings(SHLD), Staples Inc.(SPLS)
Wed. - Intuit(INTU)
Thur. - Ann Taylor(ANN), Aeropostale(ARO), Gap Inc.(GPS), Marvell Technology(MRVL)
Fri. - None of note

Other events that have market-moving potential this week include:

Mon. - American Society of Clinical Oncology, JP Morgan Tech Conference, Thomas Weisel Internet Conference
Tue. - American Society of Clinical Oncology, Thomas Weisel Internet Conference, JP Moran Tech Conference, Goldman Sachs Basic Materials Conference, Banc of America Healthcare Conference
Wed. - Banc of American Healthcare Conference, JP Morgan Tech Conference
Thur. - Semi Book-to-Bill, Fed's Guynn speaks, Fed's Olson speaks, Fed's Greenspan speaks, JP Morgan Tech Conference
Fri. - None of note

BOTTOM LINE: I expect US stocks to finish the week modestly higher on short-covering, good earnings reports, better inflation readings and bargain-hunting. My trading indicators are still giving neutral signals and the Portfolio is 50% net long heading into the week. I will resume full blogging on Wednesday.

Market Week in Review

S&P 500 1,154.05 -1.48%*



Click here for the Weekly Wrap by Briefing.com.

BOTTOM LINE: Overall, last week's market performance was negative considering the mostly positive economic data, falling energy prices and declining long-term interest rates. The advance/decline fell, most sectors were lower and volume was average on the week. Tech stocks outperformed substantially as investors rotated out of commodity-related shares. Measures of investor anxiety were mostly higher on the week. The AAII % Bulls rose modestly, but is still at pessimistic levels, which is a positive. Investors are currently pricing in the possibility of a US hard landing and lower inflation. I see very little evidence of a hard landing and significant evidence that inflation has peaked for this cycle. Another leg lower has likely begun in energy prices and the contango in the futures market still exists. I continue to believe this situation, slowing demand, excess supply and a firmer US dollar, will result in a much larger decline in oil prices than almost anyone expects. The accelerated decline will likely occur when the contango begins to reverse itself. Many believe the Fed is targeting the housing market with it continuing "measured" rate hikes. However, each time the Fed hikes rates the odds of a US hard landing increase, which results in lower long-term interest rates and more investors leaving the stock market. Thus, Fed raises may be inadvertently adding fuel to the housing fire. I have to believe the Fed sees this. I suspect it is more likely the Fed has been targeting the CRB Index instead, which has been the main source of inflation fears. The recent breakdown in the CRB is unambiguously positive for future inflation readings. I continue to believe the Fed will hike rates at the June meeting and remove the "measured" language, paving the way for a pause in their rate of hikes. With recent developments, I am now more confident in my prediction of a strong second half for US stocks.

*5-day % Change

Weekly Scoreboard*

Indices
S&P 500 1,154.05 -1.48%
DJIA 10,140.12 -1.98%
NASDAQ 1,976.78 +.48%
Russell 2000 582.02 -2.43%
DJ Wilshire 5000 11,357.91 -1.54%
S&P Equity Long/Short Index 1,004.49 -.09%
S&P Barra Growth 560.0 -1.05%
S&P Barra Value 689.63 -1.90%
Morgan Stanley Consumer 573.61 -1.16%
Morgan Stanley Cyclical 686.57 -3.75%
Morgan Stanley Technology 458.21 +2.22%
Transports 3,402.20 -3.72%
Utilities 355.42 -2.59%
Bloomberg Crude Oil % Bulls 22.0 -37.30%
Put/Call 1.05 +2.94%
NYSE Arms 1.25 +31.58%
Volatility(VIX) 16.32 +16.16%
ISE Sentiment 107.0 -33.54%
AAII % Bulls 30.52 +6.83%
US Dollar 86.10 +1.76%
CRB 293.85 -2.20%

Futures Spot Prices
Crude Oil 48.67 -5.13%
Unleaded Gasoline 141.22 -5.22%
Natural Gas 6.54 -1.49%
Heating Oil 137.03 -5.17%
Gold 420.60 -1.48%
Base Metals 120.07 -2.24%
Copper 135.20 -6.50%
10-year US Treasury Yield 4.12% -3.29%
Average 30-year Mortgage Rate 5.77% +.35%

Leading Sectors
Disk Drives +2.91%
Semis +2.87%
Networking +2.44%

Lagging Sectors
Oil Tankers -6.52%
Gold & Silver -7.80%
Steel -11.98%

*5-Day % Change

***Alert***

Due to a scheduling conflict blogging will be light for the next few days. I will post the Weekly Scoreboard late this evening.