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The third quarter earnings season is now “officially underway. However, we still have a relatively light earnings release schedule, with a total of only 65 firms, but that includes 18 from the S&P 500.
We define any fiscal period ending in August, September and October to be the third quarter. So we have already been getting some “pre-season games of firms with fiscal periods that end in August, but those have just been a trickle. As of the 10/7 close, only 6% of the S&P 500 had reported. The 18 from the S&P 500 include some of the most important bellwethers of the U.S. market, including CSX ( CSX - Analyst Report ) , Intel ( INTC - Analyst Report ) , J.P. Morgan ( JPM - Analyst Report ) , General Electric ( GE - Analyst Report ) , Google ( GOOG - Analyst Report ) and Gannett (GCI). Together they should give some interesting clues on the overall economy.
On the economic data front, things are going to start slowly, but we have several important numbers due out later in the week. While not a number per se, the minutes of the last Fed meeting are due out on Monday, and will be looked at closely to judge the odds for a second round of quantitative easing (QE2). Wednesday we get the Budget Deficit, which will wrap up the fiscal year. Thursday follows with the even more important deficit -- the trade deficit -- as well as producer prices. Friday wraps up with Consumer Prices and Retail sales.
- No numbers, just the minutes of the 9/21 Fed meeting. These will offer important clues as to if the Fed will announce buying longer term T-notes at its meeting on 11/3, and if so, the magnitude of such a purchase program. Based on recent speeches by Fed officials, this seems to be a very contentious issue within the Fed. Personally I favor the idea, but additional monetary stimulus will only help at the margin to get the economy going again. What we really need is more fiscal stimulus.
- The weekly data on mortgage applications is due out. Recently, most of the activity in mortgages has been due to refinancing as mortgage rates have tumbled to their lowest levels in decades. Purchase applications have been soft, but if they pick up, it would be an indication of a rebound in existing home sales.
- The Federal Budget deficit is expected to come in at 59.5 billion, up from 46.6 billion a year ago. The data is highly seasonal, but is not seasonally adjusted, so it is the year-over-year comparison that should be looked at. This month wraps up the fiscal year. Through the first 11 months of the fiscal year the Federal Government has spilled $1.26 Trillion worth of red ink, down 8.1% from the $1.37 Trillion spilled in the first 11 months of fiscal 2009.
- Weekly initial claims for unemployment insurance come out. They fell by 11,000 in the last week to 445,000. They have fallen in six of the last seven weeks. After a huge downtrend from mid-April through the end of 2009, initial claims have been locked in a tight “trading range. Look for them to fall modestly next week. If they do, they will break out of the trading range to the downside. We probably need for weekly claims (and the four-week moving average of them) to get down to closer to 400,000 to signal that the economy is adding enough jobs to make a dent in the unemployment rate. A rate of over 500,000 signals that the unemployment rate is probably headed back up and a high probability of a double dip.
- Continuing claims have also in a downtrend of late. Last week they fell by 48,000 to 4.462 million. That is down 1.525 million from a year ago. Some of the longer-term decline was due to people simply exhausting their regular state benefits, which run out after 26 weeks. Federally paid extended claims rose by 257,000 to 5.135 million. Looking at just the regular continuing claims numbers is a serious mistake. They only include a little over half of the unemployed now, given the unprecedentedly high duration of unemployment figures. A better measure is the total number of people getting unemployment benefits, currently at 9.597 million, which is up 208,000 from last week. The total number of people getting benefits is now 262,000 below year-ago levels. Make sure to look at both sets of numbers! Many in the press reports will not, but we will here at Zacks.
- The Producer Price Index (PPI) for finished goods is expected to increase by 0.3% in September, down from a 0.4% increase in August. Inflation pressures are likely to be higher further up the production pipeline for intermediate and crude goods. Excluding the volatile food and energy components to get the core PPI, prices are expected to rise 0.2%, up from just 0.1% in August. Overall inflationary pressure remain very subdued, reflecting the vast amount of slack in the economy.
- The Trade Deficit is expected to rise to $44.5 billion for August from 42.8 billion in July. This is probably the most important number to be released for the week, and if the trade deficit does rise as expected it will be bad news. The big slowdown in GDP growth we saw from the first quarter to the second quarter can almost entirely be blamed on the deterioration in the Trade Deficit (or, more precisely, net exports). A big increase in the deficit for August would be a very bad omen for GDP growth in the third quarter. Given the recent sharp decline in the dollar it would be disappointing, but currency moves often have significant lags before they affect net exports. Particularly for the short term, the trade deficit is a FAR bigger economic problem than is the budget deficit.
- The Consumer Price Index (CPI) is expected to increase just 0.2% in September, down from a 0.3% increase in August. If food and energy prices are excluded, the rise is expected to be just 0.1%, matching the rise in August. One of the key reasons we have seen virtually no inflation to speak of so far this year -- particularly core inflation -- is that the cost of shelter has been flat to down. Rent and Owners Equivalent Rent are by far the biggest part of the CPI, accounting for almost a third of the total index and close to 40% of the core index.
- The N.Y. Fed manufacturing survey is expected to rise to 7.0 for October from 4.1 in September. This is sort of like a mini-ISM number, but with 0.0 as the point dividing expansion from contraction. Thus if the consensus is right, manufacturing activity in New York State will be expanding, and at a faster rate than in August. A reading of 7.0, however, is still quite sluggish.
|Company||Ticker||Qtr End||EPS Est|| Year Ago |
| Last EPS |
|Next EPS Report Date||Time||Daily Price|
|KAYNE ANDSN EGY||KED||201008||$0.40||NA||-54.29||20101012||AMC||$16.10|
|LINEAR TEC CORP||LLTC||201009||$0.61||$0.27||5.88||20101012||AMC||$30.83|
|NATL AMER UNIV||NAUH||201008||$0.09||NA||163.64||20101012||BTO||$7.73|
|OIL DRI CORP AM||ODC||201007||$0.34||$0.35||9.37||20101012||$21.32|
|ASML HOLDING NV||ASML||201009||$0.74||$0.07||15.25||20101013||BTO||$29.48|
|TESSCO TECH INC||TESS||201009||$0.44||$0.34||4||20101013||AMC||$15.55|
|UNIVL FST PRODS||UFPI||201009||$0.52||$0.51||-21.35||20101013||AMC||$30.04|
|WD 40 CO||WDFC||201008||$0.38||$0.46||28.57||20101013||AMC||$39.05|
|ADV MICRO DEV||AMD||201009||$0.06||($0.26)||100||20101014||AMC||$6.87|
|GOOGLE INC-CL A||GOOG||201009||$5.89||$5.13||-1.21||20101014||AMC||$530.01|
|GRAINGER W W||GWW||201009||$1.81||$1.51||10||20101014||BTO||$121.99|
|HUNT (JB) TRANS||JBHT||201009||$0.44||$0.31||11.11||20101014||AMC||$35.42|
|IDT CORP-CL B||IDT||201007||NA||NA||N/A||20101014||AMC||$17.22|
|JOES JEANS INC||JOEZ||201008||$0.01||$0.03||0||20101014||AMC||$2.10|
|MGIC INVSTMT CP||MTG||201009||($0.63)||($4.44)||93.65||20101014||BTO||$9.42|
Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With more than 25 years investment experience he has become a popular commentator appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in charge of the market beating Zacks Strategic Investor service.
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