Last week could have been the unofficial start of the real bear market. From bad economic data to a negative tweet from a presidential candidate, or even overanalyzing a speech from the Federal Reserve Chairwoman, investors have been looking for any reason to sell.
Unfortunately, this week could bring more of the same.
On the economic data front, investors will be forced to digest a hefty dose of consumer-driven data. Unemployment numbers, consumer confidence and spending data as well as measures of how much workers are earning will all be released this week. Any dour reports or less-than-stellar numbers could show just how fragile the consumer economy is in the United States. And considering just how important consumers are to the health and growth of the U.S., it could mean that conditions are much worse than expected.
On the stock earnings front, several poor reports and huge write-downs from bellwethers have intensified selling pressure. Any poor reports this week could send the markets into a tail spin. As we’ve warned in recent weeks, investors should continue to brace themselves for market volatility.
The data comes in hot and heavy starting Monday morning, with a trio of consumer-related numbers coming from the Bureau of Economic Analysis. Up first is Personal Consumption Expenditures (PCE). PCE is a measure of the price of goods and services purchased by consumers, excluding food and energy. However, unlike Core CPI, PCE only accounts for individuals and is rumored to be the Fed’s favorite metric for inflation. Analysts expect it to stay flat at 0.1%. Personal spending will also be released; analysts are expecting that figure to rise by 0.3%. Finally, consumer’s disposable income, which generally translates to future spending, is set to rise at 0.4%.
- Old MacDonald had a farm, but investors in Cal-Maine Foods (CALM ) could have a gold mine. The egg producer and chicken farmer is set to report earnings of $3.14 per share before the bell. CALM yields 1.92%.
- All of this consumer data will be important for Vail Resorts, Inc. (MTN ). The ski resort owner/operator is expected to report terrible earnings. MTN is estimated to report a loss of $1.87 per share. The firm’s 2.32% dividend yield may provide some comfort for investors in its shares.
While there is some minor economic data released Tuesday morning, the real piece of information will be consumer confidence. The Conference Board will release its survey of how 5,000 households are doing before the bell. Analysts expect a big drop in the number, from 101.5 down to 96.2. That means all is not right in consumer land.
- AZZ Inc. (AZZ ) is expected to report earnings of 68 cents per share before market open on Tuesday. The producer of various galvanized steel infrastructure products yields 1.19%.
- Continuing with Tuesday’s focus on the consumer, Costco Wholesale Corporation (COST ) will report earnings. The warehouse club is set to release earnings of $1.66 per share and yields 1.1%.
- Also releasing earnings on Tuesday will be master limited partnership Ferrellgas Partners, L.P. (FGP ). The distributor of propane will report a loss of 22 cents per share. FGP yields 9.67%.
Wednesday will bring a trio of Federal Reserve open market committee members giving speeches. This includes Janet Yellen. However, their messages may be overshadowed, as will be the estimated decline in crude oil inventories, by ADP’s non-farm employment change. The payroll processor metric of the estimated change in the number of employed people during the previous month is set to rise to 191,000. The last few figures failed to meet analyst predictions.
- ADP’s chief rival in the payroll processing and HR outsourcing world, Paychex, Inc. (PAYX ) is set to earn 51 cents per share when it reports before the bell. PAYX yields 3.6%.
Thursday kicks off with a bang as there will be two employment data sets released for the market open. The Department of Labor will release its weekly report on new unemployment claims; the metric is set to rise to 273,000 workers. Secondly, consultancy Challenger, Gray & Christmas will release the number of job cuts announced by employer data. That should come in at 2.9%.
As if this wasn’t enough, the Institute for Supply Management will release its all-important PMI/manufacturing index. That number is set to show a decline to 50.8, a level seen just before the contraction of the industrial/manufacturing sector. Construction spending and total vehicle sales will be reported.
- Adding the spice to its earnings could be McCormick & Company, Incorporated (MKC ). The consumer staples spice and packaged food manufacturer is estimated to report earnings of 87 cents per share. MKC yields 1.92%.
Investors hoping for a break in the fury of economic data released this week will have to wait until the weekend. There’s a trio of jobs-related data that could sink the markets. First, the Bureau of Labor Statistics will release hourly wage data. The measure of rising wages is set to rise only 0.2%. That’s a decrease versus the last reported number. Secondly, the Bureau will release its non-farm employment change. That number should show an increase of 202,000 new jobs. Finally, the agency will report the unemployment rate. Analysts are expecting the metric to hold at 5.3%.
At least investors will get a break on the earnings front. There are no companies reporting quarterly earnings on Friday.
The Bottom Line
From spending to jobs, this week’s focus will be on the health of the American consumer. Given how important consumers are to the American economy, any unexpectedly poor figures could derail the markets and give traders an excuse to sell. Investors should brace for another week of volatility.
Correction: In the September 21 Market Glance, we reported that Darden Restaurants, Inc. (DRI ) owned the restaurant chain Red Lobster among its stable of brands. However, that is no longer true. Back in May, DRI sold the chain to private equity firm Golden Gate Capital.
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