Week Ahead - Comey, Qatar, Terrorism, Oh My

by: Markos Kaminis

Former FBI Director Comey will testify before a Senate panel this week, likely overhanging and moving markets.

Geopolitics is weighing due to a rift between several Middle Eastern states and the weekend's terror strike in the U.K.

The Fed decision continues to overhang the market, though it is two weeks away.

Economic data is light this week, but still matters. Look for jobs data and service sector measures to matter most.

The market should shyly approach Comey's testimony and take direction from it thereafter.

Well there certainly seem to be a slew of things to worry about heading into this Wall Street work week. Anxiety was not absent to begin with this June, given the market is already worried about what the Fed might do, or in my view, what it might not see in its forecasts in about two week's time - inflation. Oh, and former FBI Director Jim Comey is due to testify in a few days on his FBI's investigation of Russia's meddling in our elections and how that may have played in his job loss; some say that may lead to another pretty important job loss... And did you notice that Saudi Arabia, Egypt, Bahrain and the U.A.E. are cutting off diplomatic ties to Gulf neighbor Qatar, soon to be known as Little Iran? Finally and unfortunately, a handful of maniacs terrorized London this weekend just ahead of this week's elections for the United Kingdom, and we have to discuss how that matters to securities. Of course there is also the usual boring economic data on tap for the week ahead, along with a slew of PMI data for overseas markets. So let's get started scaring everybody now...

FBI Director Jim Comey is due to testify before a Senate committee this Thursday. It's what we have all been waiting for, the moment we'll hear from the man described by most as honest about exactly what transpired between he and President Trump ahead of the President's releasing Comey of his responsibilities as FBI Director. Was there an obstruction of justice, an attempt to stop an investigation of Russian meddling in the election that put the current Administration into office? One Harvard Law Professor has famously been claiming this is just-cause for impeachment of the president of the United States.

Comey is seen as a straight-up guy and is expected to tell the truth and nothing but the truth. In other words, this could get very interesting for casual followers, but downright terrifying for investors. For when the full faith in confidence of the United States government comes into question, our currency, our borrowing credibility and our economy are at risk, not to mention our securities markets. A few foolish souls are looking ahead a few years to the conclusion of Special Counsel Mueller's investigation, but make no mistake, Comey's testimony matters.

Stuff like this tends to get smoothed over in the end. Nobody wants to see an impeachment really, save for a few short-sighted congressmen in the other party. Actually, every Democrat on the panel will likely seize a moment in the limelight with hard questions meant to earn them re-election from a base that wants to see a hard press. I've seen enough of these testimonies to know that it's about as political as anything else when it comes to D.C. That is also bad for stocks. This serves volatility (NYSE: VXX) and pressures stocks (NYSE: VTI). Let's not forget though that truth and justice matter far more.

The isolation of Qatar by four of its most important neighbors, Saudi Arabia, the U.A.E., Bahrain and Egypt sure felt like a coordinated effort and first wave of a foreign policy move to get Iran to bend. There are also reports that the recently armed Kurds (by us) are mounting an initiative in Syria. Qatar, or Little Iran, is being pressured because of its "support of Iran, ISIS and other terrorist organizations." Diplomatic relations will be cut; citizens of those four nations have been given a time limit to leave Qatar; the Saudi border with Qatar will be closed; and traffic between the four countries and Qatar will cease. Oil futures (NYSE: OIL) initially benefited from what seems like an intensifying rift in the Middle East, but crude (NYSE: USO) drifted lower as we approached the open to U.S. trading. Look for an update on oil in my column; I haven't written on oil since advising to "sell the news" relative to the OPEC meeting in the days ahead of it.

U.K. equities (NYSE: EWU) were only off fractionally Monday as investors assess the weekend's terror strike at London Bridge. The terror level remains at "severe" for Great Britain ahead of the U.K. elections. The news is keeping gold (NYSE: GLD) elevated, I suspect because the dollar (NYSE: UUP) does not feel like a better option for many investors ahead of Jim Comey's testimony.

There's a lull in Fed speak as the silent period before the June Federal Open Market Committee (FOMC) ties tongues. That will not stop folks from worrying about the Fed on every economic data point reported until the meeting two weeks from now. My Fed concern is that it might miss the ball on burgeoning compensation inflation and act late or too slowly in tightening monetary policy.

This week's economic data headlines with service sector indicators. They are critical for a U.S. economy that is service sector driven today. ISM's Non-Manufacturing Index will be reported Monday along with Markit Economics' measure, the PMI Services Index. Economists expect ISM's measure to stick in healthy territory expressing expectations for economic expansion. The index is seen marking 57.0 for May, down slightly from 57.5 for April.

The Labor Market Conditions Index is also coming Monday, and it is expected to ease for May to 2.6, from 3.5. It will offer a take on wages, so I'll have a look-see. Productivity & Costs have already been reported Monday morning, and showed up 2.2% in this revision of Q1 data, down from a 3.0% increase when first reported. Productivity was reported flat, better than the 0.6% decrease in its first reporting. See my report on "Today's Market" later today for more data on the day.

For the rest of the week, Job Openings & Labor Turnover (JOLTS) will be reported. We'll have a close look for any indication from increased openings that scarce labor is making it more difficult for employers to fill roles. Also look for "quits" data to show confidence by laborers that when leaving a job, they'll quickly find another.

I do not see much in this week's data capable of significantly impacting the market's expectations for the Fed, save for any market reaction to the Comey testimony or the U.K. election.

Apple (NASDAQ: AAPL) has its developers' conference Monday and it could move the stock and the market on the whole - it's the one stock with that power. The week's earnings schedule highlights Ascena Retail (NASDAQ: ASNA), Ambarella (NASDAQ: AMBA), Canadian Solar (NASDAQ: CSIQ), ABM Industries (NYSE: ABM), Dell Technologies (NASDAQ: DVMT), FuelCell Energy (NASDAQ: FCEL), J.M. Smucker (NYSE: SJM), Nobility Homes (NASDAQ: NOBH) and KMG Chemicals (NYSE: KMG).

Stocks (NYSE: SPY) (NYSE: DIA) (NASDAQ: QQQ) were marking new highs last week, but this week face some obstacles. I expect markets will be shy heading into the Comey testimony Thursday, and determine their flight path thereafter.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.