Back to top

These Reports Will Dictate the Market's Direction

Read MoreHide Full Article

This week we have several very important economic reports coming out.  These top tier reports will give us key data on future indicators regarding factory orders, inflation, retail sales, housing, and consumer sentiment.

The biggest report is coming out Wednesday; the Consumer Price Index.  With the current inflation worries, and the implications of the Fed raising rates at a faster pace, this will be the most closely watched report this week.  The last report showed that wages grew by +2.9% which spooked the markets and caused the flash crash.  Current year over year expectations are for a slight dip from 2.1% to 2%. Any pullback will be viewed as a positive for the markets, but if we see an uptick it could cause the markets to fall once again.

Also on Wednesday, the Retail Sales report will be released and this will tell us if the recent strength in the segment will continue.  Expectations are for +0.3% gain which would be the seventh consecutive month of a positive reading. A positive reading would help many retail companies like Dillard’s (DDS - Free Report) , Kohl's (KSS - Free Report) , Conn's Inc. (CONN - Free Report) , and Foot Locker (FL - Free Report) all of which currently hold a Zacks Rank #1 Strong Buy rating.

The Retail report will also be tied to Friday's Consumer Sentiment announcement which is expected to remain elevated. 


As you can see in the table above, consumer sentiment has been around a reading of 95 for over a year.  If consumer sentiment remains at or near its current levels it bodes well for the retail sector, as this report gauges consumer spending, and the overall attitude of the economy. 

This week we will also see two regional manufacturing reports, the Phily Fed, and the Empire State.  These reports will give us the conditions in local regions, and will be an indicator for the more important ISM manufacturing index coming out on March 1st.  The recent readings have been very strong, and have shown positive momentum in production and new orders over the past several months. Currently, the regional reports are expected to show continued strong growth. 

Lastly, we will also see two very important housing reports this week.  On Thursday the Housing Market Index will be released. This forward looking report has remained high for the past several months.


Two closely watched parts of the report will indicate if the increasing interest rate trend will begin show any signs of having a negative impact on the index.  And if the uptick in mortgage rates is impacting housing affordability.

This report coupled with Friday's Housing Starts data will be an important barometer for the housing sector and several other sub sectors that rely on new housing.

Housing starts took a bit of a dip last month due to weather related issues as you can see in the chart below.


But this month's data should be clean of weather related issues, and is currently expected to show a snap back to 1.23 million units, well above December's reading of 1.1 million units.  Also, housing permits are expected to remain high at 1.3 million. 

A combination of an uptick in both the housing market index, and housing starts will be beneficial for home builders like KB Homes (KBH - Free Report) , Lennar Corp (LEN - Free Report) , and D.R. Horton (DHI - Free Report) , all of which currently carry a Zacks Rank #2 Buy rating.

The data will also be a forward indicator for companies that depend on new homes who supply them with furniture, appliances, and other household needs. Companies that can benefit from positive housing data include, Restoration Hardware (RH - Free Report) , At Home Group (HOME - Free Report) , Beacon Roofing (BECN - Free Report) , and Eloctorlux ELUX-B, all of which currently carry a Zacks Rank #1 Strong Buy rating. 

If these data points come in as expected, it will set an overall positive tone for the markets for the next several weeks.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

More from Zacks Video Blog

You May Like