Alcoa, Inc.'s (NYSE:AA) earnings report and China's GDP release are likely to dictate the direction of trade this week, and I suspect it will be lower. Even while the investment community is well aware of the decrease in industrial commodity prices over the last few months, Alcoa's report will bring the fact and the reason behind it into the spotlight. Global economic slowing is affecting demand for the raw materials used in industrial production. I said economic growth is slowing, and it's a fact that is finally being accounted for in securities values.
When China reports its GDP for the second quarter Friday, I'm not sure it will accurately reflect the true degree of its economic challenges. The data point is basically China's best estimate, and I suspect "best" has a double meaning. Still, its surprise rate cut last week offers investors a chance to read between the lines, and the message is not a pleasant one.
- SPDR S&P 500 (NYSEARCA:SPY) -0.4%
- SPDR Dow Jones Industrial Average (NYSEARCA:DIA) -0.7%
- PowerShares QQQ (NASDAQ:QQQ) eased fractionally
- iShares Russell 2000 Index (NYSEARCA:IWM) +1.2%
- iPath S&P GSCI Crude Oil TR Index ETN (NYSEARCA:OIL) -0.6%
- SPDR Gold Shares (NYSEARCA:GLD) -0.9%
- iShares S&P Europe 350 Index (NYSEARCA:IEV) -2.0%
- iShares MSCI All Country Asia ex Japan (NASDAQ:AAXJ) -0.3%
Weekly Market Factors Schedule:
Alcoa unofficially starts earnings season with its report after the close of trading Monday. Prices of industrial commodities have been in the midst of a sharp correction over the last two months, and so Alcoa's earnings and outlook are likely to reflect that. Those looking for a short opportunity should, however, consider that AA shares have been correcting as well, and may have already accounted for the change.
After Friday's unsettling central bank blitzkrieg, Europe will continue to stress the wire. The European Central Bank (ECB) President Mario Draghi is scheduled to discuss the state of the eurozone economy and the ECB's latest monetary policy Monday. That will be followed by a meeting of euro-zone finance ministers. Meanwhile, European bailout activities are supposed to be put into action, but may be delayed.
Two Fed-heads are scheduled to speak as the Fed's Chicago and Boston Bank branch presidents, Charles Evans and Eric Rosengren, address the Sasin Bangkok Forum 2012. You should be able to follow the speeches via each branches website releases. They may offer insight into the Fed meeting minutes release due later this week.
Consumer Credit data will be reported for the month of May at 3:00 PM. Economists are expecting an expansion of $8.5 billion, versus April's increase of $6.5 billion. The details of this report matter, as they show the availability of credit for consumers and demand for various types of loans. The data thus offers a special perspective into the economy.
A Bank of England ((NYSE:BOE)) official will be testifying on the Libor rate fixing scandal involving Barclays (NYSE:BCS). Under Armour (NYSE:UA) will split its shares 2-for-1. The day's earnings schedule has confirmed reports from Alcoa , A. Schulman (NASDAQ:SHLM), Chase Corp. (NYSEMKT:CCF), CrowdGather (OTCQB:CRWG), Cubist Pharmaceuticals (CBST), Healthcare Services Group (NASDAQ:HCSG), Independent Bank MA (NASDAQ:INDB), JDA Software (NASDAQ:JDAS), PriceSmart (NASDAQ:PSMT), Pure Cycle (NASDAQ:PCYO), Washington Federal (NASDAQ:WAFD), WD-40 (NASDAQ:WDFC) and Yum! Brands (NYSE:YUM).
You'll want to tune in to C-SPAN Tuesday in order to catch two of those congressional testimonies that raise the blood pressure and incite nausea, at least for me. The House Ways and Means Committee will hoot and holler about the recent Supreme Court health care ruling. The escapade promises the usual bickering and bolstering of party politics. And don't miss the House Financial Services Committee hearing on the impact of Dodd-Frank either.
Small businessmen will weigh in on the economy when the NFIB Small Business Optimism Index is published in the pre-market. The index dipped slightly in May to a reading of 94.4, and economists see it falling further in June, to a mark of 92.0. This reading is important as small businesses employ the majority of the American workforce.
The regular ICSC same-store sales data will arrive in the early morning as always. Last week's report covering the period ending June 30th showed a 0.2% week-to-week sales increase and a meek 1.4% year-to-year gain. There's a bad moon rising over the American consumer, and last week's data supports my recent concern.
St. Louis Fed Bank President James Bullard will speak at the OMFIF Golden Series Lecture in London. Also, Ecofin meets to discuss the EU summit moves.
Tech geeks will congregate at Semicon West to see what new computer chip breakthroughs have been accomplished and are on the way. The earnings schedule has confirmed EPS reports from Helen of Troy (NASDAQ:HELE), Hi-Tech Pharmacal (NASDAQ:HITK), OCZ Technology Group (NASDAQ:OCZ), Penford (NASDAQ:PENX), Rocky Mountain Chocolate Factory (NASDAQ:RMCF), SemiLEDS (NASDAQ:LEDS), Shaw Group (NYSE:SHAW), Synergy Resources (NYSEMKT:SYRG), VOXX International (NASDAQ:VOXX), Wolverine World Wide (NYSE:WWW) and Zep, Inc. (NYSE:ZEP).
The Fed meeting minutes will dominate the media Wednesday from start to finish. The 2:00 PM release of the Federal Open Market Committee (FOMC) meeting minutes from its June assembly will have all the attention of market mavens and press alike. They'll be looking for insights into the next Fed move. Considering the dynamic nature of news, the EU crisis and global deterioration, I trust my own better judgment more than the now aged FOMC information for such insight. For that reason, you'll do better to just stay attuned to our little blog on Wall Street.
A good bit of other data will be brushed aside by the FOMC chatter. But at 8:30 AM, you'll want to see the report on International Trade. Economists surveyed by Bloomberg expect the trade deficit to have narrowed to $48.7 billion in May at the consensus, from $50.1 billion the prior month.
Also in the pre-market, the Mortgage Bankers Association (MBA) reports on weekly mortgage applications. Rates at historical lows have had little effect on mortgage activity, but the Home Affordable Refinance Program and recent changes to FHA fees have spurred activity.
At 10:00 AM, the government will report on Wholesale Trade for the month of May. Economists see wholesale inventories rising 0.3%, against the 0.6% increase in April. More importantly, you'll want to see how inventory growth compared against sales. The inventory-to-sales ratio stayed at 1.17 in April, versus March, which was also very close to last year's 1.15 reading.
The Petroleum Status Report reaches the wire at 10:30 AM. Last week's report covering the week ending June 29 showed crude oil inventory decreased by 4.3 million barrels, though stores stayed above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 0.2 million barrels, but they were below the lower limit of the average range for this time of year.
Just when you thought the fight was over, House Republicans will vote on whether to repeal the President's health care reform law.
Nortel Networks, in bankruptcy court, seeks absolution from its $3.1 billion U.K. pension plan liability. Chevron (NYSE:CVX) will offer its update for the second quarter. Confirmed earnings reports include ADTRAN (NASDAQ:ADTN), API Technologies (NASDAQ:ATNY), Art's Way Manufacturing (NASDAQ:ARTW), Itron (NASDAQ:ITRI), Jewett-Cameron Trading Co. (NASDAQ:JCTCF), Marriott Int'l (NYSE:MAR), Material Sciences (NASDAQ:MASC), Northern Technologies Int'l (INTIC), Premier Exhibitions (NASDAQ:PRXI) and Texas Industries (NYSE:TXI).
Before any American data is reported, we'll hear from the Bank of Japan (BOJ). Many expect the bank to act in expansionary fashion.
Not a week since the exposed Ugly Underlying Trend Developing in Labor, the latest Weekly Jobless Claims Report reaches the wire at 8:30 AM. Last week's data showed weekly claims at 374K, with the four-week moving average down 1,500, to 385,750.
Look for the latest Import and Export Prices Report (for June) at 8:30 as well. Export prices are expected to have fallen by 0.2%, after dropping 0.4% in May. Import prices are expected to have fallen by 1.9%, after dropping 1.0% last month.
The Bloomberg Consumer Comfort Index is due for report at 10:00 AM. Last week's measure of the consumer mood declined 1.4 points to negative 37.5. We've been tracking a slide in consumer confidence and spending, and have selected a few stocks that we think will serve the market well.
The EIA Natural Gas Report is up for release at 10:30 AM. Last week's data covering the period ending June 29 showed a 39 Bcf inventory increase. Gas stores were 573 Bcf above the 5-year average for this time of year.
The monthly Treasury Budget is due for release at 2:00 PM. Economists are looking for a June deficit of $75 billion. In May, the budget ran at a deficit of $124.6 billion. San Francisco Fed Bank President John Williams will address a group in Portland, Oregon at 3:40 PM EDT.
Yahoo (NASDAQ:YHOO) has its annual shareholder meeting with many expecting a new CEO to be announced. The day's earnings schedule has AngioDynamics (NASDAQ:ANGO), Bank of the Ozarks (NASDAQ:OZRK), Commerce Bancshares (NASDAQ:CBSH), Emmis Communications (NASDAQ:EMMS), Fastenal (NASDAQ:FAST), Home Loan Servicing Solutions (NASDAQ:HLSS), Resources Connection (NASDAQ:RECN) and Trinity Biotech (NASDAQ:TRIB).
The big news Friday emanates from China, where GDP will be reported. All signs point toward a slowing rate of growth for the second quarter. A Reuters poll indicates economist expectations for 7.6% year-to-year growth in Q2, marking the sixth straight quarter of slower growth. Last week's surprise rate cut by the Chinese central bank raised concerns about China, and so the market will hinge on this data Friday.
Look for the Producer Price Index at 8:30 AM. Economists expect prices fell 0.4% in June after declining 1.0% in May on lower fuel prices. When excluding food and fuel prices, economists see prices higher by 0.2%, matching the prior month increase.
The Reuters/University of Michigan Consumer Sentiment Index is up for release at 9:55 AM. The consumer mood measure slipped to close out June, falling to 73.2 from 74.1 at mid-month. Economists see the index rising to 73.5 this time around, but I would beg to differ based on the data I've seen.
Today's the deadline for J.P. Morgan Chase (NYSE:JPM) to turn over emails sought by the U.S. government in an energy-market manipulation probe. J.P. Morgan also reports EPS results Friday and is expected to provide more information on its recent derivatives losses.
Also reporting earnings Friday, look for news from Wells Fargo (NYSE:WFC), Ames National (NASDAQ:ATLO), iGATE (NASDAQ:IGTE), Ocean Power Technologies (NASDAQ:OPTT), PDL BioPharma (NASDAQ:PDLI) and Webster Financial (NYSE:WBS).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.