This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at firstname.lastname@example.org or call 800-767-3771 ext. 9339.
The second quarter earnings season is over. Now we are starting to see a few companies report their third-quarter results (period ending in August September or October). Just a trickle so far, but those might provide some clues as to how well the rest of the market will fare in the upcoming earnings season.
There will be just 36 firms reporting, but 14 of those are in the S&P 500, including Adobe ( ADBE - Analyst Report ) , AutoZone ( AZO - Analyst Report ) , Carnival Cruise ( CCL - Analyst Report ) , Discover Financial ( DFS - Analyst Report ) , Federal Express ( FDX - Analyst Report ) , Nike ( NKE - Analyst Report ) and Oracle ( ORCL - Analyst Report ) . That is an interesting cross-section of the market which may well provide some interesting insights.
It will be a light week for economic data. The main focus of the official numbers will be on Housing, starting with the home builders index, followed by housing starts and building permits and finally existing home sales. The Fed is holding a meeting, but there will be no change in the Fed Funds rate. The language of their statement might provide clues about the potential for further unconventional easing steps that they might take.
With few earnings and little data outside of housing, the focus of the market will likely continue to be on the other side of the Atlantic and the ongoing Greek drama....
- The National Association of Homebuilders Index is likely to remain unchanged at 15, which is a simply abysmal reading. This is a magic 50 index, so any reading below 50 indicates a poor outlook for the homebuilders.
- The Data on Housing Starts and Building Permits will provide the reason for the pessimism among the homebuilders. In July, housing starts were running at a seasonally adjusted annual rate of just 604,000. They are expected to decline still further to just 592,000 (I’ll take the under on that one). That is down from over 2.2 million at the height of the bubble. It used to be a rarity for housing starts to be below 1 million, but August will mark the 33rd consecutive month where starts have been below 1 million.
- The best leading indicator for housing starts is building permits. They ran at 597,000 in July and are also expected to be effectively unchanged rising to 598,000 (I’ll also take the under). The bubble peak was also over 2.2 million. Traditionally homebuilding has been the sector that has led us out of recessions. That locomotive is derailed and does not appear likely to get back on track anytime soon.
- All eyes will be on the Federal Reserve Board, even though everyone knows that the Fed Funds rate will remain in the 0 to 0.25% range it has been stuck in since December 2008. The Fed has pledged to keep it there until the middle of 2013. The Fed is deeply divided on if they should do more to try to support the economy by taking unconventional steps to further ease monetary policy, and the meeting was expanded to two days so they can hash things out. The language of the statement will be carefully parsed to see it they have come to any agreement. Last time there was a highly unusual three dissents to the statement. Watch to see if that changes.
- Existing home sales were running at an annual pace of 4.67 million in July. Very little change is expected, with the consensus looking for a slight increase to a 4.70 million rate. Since the sale of an existing home is simply the transfer of an existing asset, it generates very little economic activity (aside from realtor’s commissions). However, since people do tend to redecorate “new for them homes there is some activity that is generated. Still, the impact pales in comparison to new home sales, even though new home sales are just a small fraction of used home sales. The important thing in the report is the level of sales relative to inventory, or the months of supply on the market. That gives a very good clue as to the future direction of existing home prices. Housing equity is (or at least used to be) a vital repository of the wealth of the middle class. Since housing tends to be a very leveraged asset, relatively small changes in price can have a big impact on wealth. Also, being “underwater on a mortgage is a necessary (but not sufficient) condition for a foreclosure to happen. Six months supply is considered normal, and during the bubble, four months was the norm. In July it climbed to 9.4 months from 8.2 months in June, indicating continued downward pressure on housing prices.
- Weekly initial claims for unemployment insurance come out. They had a very nice decline early in they year, but have been recently in a trading range above 400,000. Last week they increased by 11,000 to 428,000. I would expect a small decline this week, but nothing big enough to really change the story of very weak job growth. The consensus is looking for 417,000. The 400,000 level is important psychologically in that it has historically been the inflection point, below which we tend to create enough jobs to bring down the unemployment rate. The four-week moving average will stay above the 400,000 level, and might top 420,000. The week-to-week numbers can be very volatile, so the four-week average is the thing to focus on. The sharp rise in initial claims were an early warning of the weak jobs report for June. Keep an eye on the prior week’s revision as well as the change from the revised number.
- Continuing claims have in a downtrend of late, but the road down has been bumpy. Last week they fell by 12,000 to 3.726 million. That is down 765,000 from a year ago. I would expect a small decline this week. The consensus is looking for 3.730 million, a very small increase. Some (most?) of the longer-term decline due to people simply exhausting their regular state benefits which run out after 26 weeks. Those, however, don’t last forever either. Federally paid extended claims rose by 10,000 last week to 3.608 million, but are down 1.352 million over the last year. Even extended benefits don’t last forever. 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 7.144 million, which is down 25,000 from last week (there are some timing issues so the change in continuing and existing claims does not match the change in the total). The total number of people getting benefits is now 2.066 million below year-ago levels. What is not known is how many people have left the extended claims via the road to prosperity -- finding a new job -- and how many have left on the road to poverty, having simply exhausted even the extended benefits. Unless the program is renewed (unlikely given the current Congress) then all extended benefits will end in January. Make sure to look at both sets of numbers! Many of the press reports will not, but we will here at Zacks.
- Nothing of particular significance.
|Company||Ticker||Qtr End||EPS Est|| Year Ago |
| Last EPS |
|Next EPS Report Date||Time||Daily Price|
|LENNAR CORP -A||LEN||201108||$0.11||$0.16||75||20110919||BTO||$13.85|
|FULL CIRCLE CAP||FULL||201106||$0.21||$0.24||0||20110920||AMC||$6.96|
|RED HAT INC||RHT||201108||$0.19||$0.14||6.25||20110921||AMC||$41.24|
|CARMAX GP (CC)||KMX||201108||$0.51||$0.48||17.02||20110922||BTO||$28.54|
|DISCOVER FIN SV||DFS||201108||$0.87||$0.47||51.39||20110922||BTO||$26.19|
|RITE AID CORP||RAD||201108||($0.18)||($0.18)||50||20110922||BTO||$1.10|
Please login to Zacks.com or register to post a comment.