Earnings Preview: Light Post-Labor Day Calendar

After enjoying a three-day weekend, traders are going to come back to their latest obsession: the Fed. The guessing game as to what the Fed is going to do about rates will continue until Sep 18.

Complicating matters will be the release of two key economic reports. The Institute for Supply Management (ISM) will publish the results of its August survey of the manufacturing sector on Tuesday. On Friday, the Department of Labor will issue August employment numbers. Both reports could show that despite all of the fuss about the credit markets, the economy continued to expand in August. Additionally, both reports provide insight into inflationary pressures with the ISM measuring prices paid and the Labor Department calculating wage growth.

As odd as it may sound, the worse possible scenario could be if the two reports showed economic growth with modest inflationary pressures. The reason is that such a scenario would not provide any clarity as to what the Fed will do at its Sep 18 meeting. Sustained growth would enable the Fed to let the market work things out, while moderating inflationary pressures could allow the Fed to lower rates. Oy.

The economic calendar will also feature July construction spending (Tuesday), July pending home sales (Wednesday), revised second-quarter productivity (Thursday), the August ISM non-manufacturing survey (Thursday) and July wholesale trade (Friday).

The earnings calendar is very light with just 46 companies confirmed to report. S&P 500 members Campbell Soup (CPB) and National Semiconductor (NSM) will both report on Thursday, Sep 6.

There are three key dates for September. The Federal Open Market Committee will hold a one day meeting on Sep 18. Rosh Hashanah, the Jewish New Year, starts at sundown on Sep 12. (Expect trading volume to taper that afternoon.) Triple witching will occur on Sep 21 and Yom Kippur will start that evening. Normally, triple witching has the possibility of causing increased volatility, but given the timing of the Jewish holiday, it is possible that a higher than normal amount of contracts could be settled on Thursday, Sep 20.

Companies That Could Issue Positive Earnings Surprises during the Week of Sep 3 - 7

Telecom equipment and service provider ADC Telecom (ADCT) topped expectations during the past two quarters by an average margin of 7.5 cents. Ahead of the company's fiscal third-quarter report, one covering brokerage analyst raised his forecast. The revision did not change the consensus estimate, which remains at 22 cents per share, but it did move the most accurate estimate up to 23 cents per share. ADC Telecom is scheduled to report on Wednesday, Sep 5, after the close of trading.

Companies That Could Issue Negative Earnings Surprises during the Week of Sep 3 - 7

NCI Building Systems (NCS) recently narrowed its forecast for fiscal third-quarter profits. The company anticipates that earnings will be in a range of 96 cents to $1.01. Three of the five covering brokerage analysts have lowered their projections in response, causing the consensus estimate to fall by four cents to $1.01 per share. NCS has missed expectations twice during the past four quarters. NCI Building Systems is scheduled to report on Tuesday, Sep 4, after the close of trading.

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