The bulls are getting desperate. Driven by chaos and a fear of being made into strip steak, they seem to be running down any which street they pass. As earnings season swings into full stampede, I heard one bovine raging on Bloomberg Radio about how earnings season would stop investors from capitulating with the double-dip recession argument. Wait a second now - he must not be a Wall Street Greek reader, or awake, given that Intel and poor economic reports already dueled it out last week, and the Sheriff won.
"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, the global economy & financial markets, real estate, shipping, fine art & antiquities and global affairs.
Appropriately enough, the economic segment that showed some of the first signs of trouble, housing, keys the marquee this week. Four housing reports litter the week's economic data flow, and we are not expecting very good news from any except perhaps the irrelevant FHFA House Price Index. Despite overwhelming numbers, corporate earnings seem likely to disappoint on net based on some of the early results and softening economic environment.
The National Association of Home Builders publishes its Housing Market Index Monday morning at 10:00 AM. The index has remained mired in deep depression, as homebuilders have had little reason for enthusiasm for quite some time now. However, the index did see some benefit this spring from the government's tax incentive for first-time homebuyers. Once the incentive expired though, builders were rudely awakened to a rough reality, a still absent housing market. June's measure of the HMI exposed that truth, as the index fell five points to a reading of 17. Economists expect the metric to fall further to 16 in July.
Markets will be closed in Japan Monday, and the International Air Show will keep British aeronautics fans busy in Farnborough, England.
Not even 24 hours after the Housing Market Index release, Housing Starts are due for the month of June by 8:30 ET. Again economists are looking for a softening situation, with Bloomberg's survey showing consensus expectations for an annual pace of 580K starts. That would mark a modest decline from May's 593K rate, which highlighted a 17.2% drop in single-family structure starts. Building Permits fell 5.9%, to 574K in May, and single-family structure authorizations dropped 9.9%. In other words, things don't look too hopeful heading into this data, and it seems economists might be playing the downtrend too cautiously.
Before the Starts data, look for the International Council of Shopping Centers (ICSC) Weekly Same-Store Sales Report at 7:45 AM ET. Sales have proven volatile over the last two weeks, jumping and then more recently retrenching sharply. Last week's report for the period ended July 10 showed a weekly decline of 1.5%. On a year-over-year basis, sales moved 3.2% higher.
Tuesday marks the filing deadline for the lead plaintiff in a class-action suit against BP (NYSE: BP). BP is now wrapped up in a quagmire with the US government, since it may want to temporarily remove the cap that has stopped oil flow into the Gulf in order to place a permanent fix. That's not selling well in Washington.
The Bank of Canada will make its latest interest rate decision Tuesday, and expectations are it will keep rates steady. The Bank of England just made its latest rate decision, but this week brings Britain's new Prime Minister, David Cameron, to Washington for his first visit with President Obama. US Fed Governor Dan Tarullo is scheduled to testify before the Senate Banking Committee on modernizing financial regulation.
An FDA panel will review Genentech's (NYSE: DNA) Avastin medication for breast cancer. General Electric (NYSE: GE) reported results last week, but meets with analysts in London Tuesday. Honda's (NYSE: HMC) CEO briefs investors on the midterm business outlook.
The Mortgage Bankers Association's Weekly Mortgage Applications Survey for the period ended July 9, 2010, produced the lowest level of activity for the Purchase Index since December of 1996. If economists or investors needed a sign of real trouble, they should have noticed this data point. The latest reading is due Wednesday in the pre-market.
The bigger story for the market on Wednesday will be Federal Reserve Chairman Bernanke's semiannual report on monetary policy, delivered via testimony to the Senate Banking Committee. We suspect it will not be long before market concerns move from a focus on future Fed rate hikes to worry about Fed inaction with regard to its support of an ailing economy. Meanwhile, the SEC will take up the topic of mutual fund fee structures.
The EIA reports on Petroleum Status at 10:30 AM. Last week's report covering the period ended July 9 produced the largest draw of inventory for the year. Some 5.1 million barrels of inventory were drawn on net. Weather was reportedly partly to blame, as difficult conditions likely kept imports offshore; the Gulf issue and resulting moratorium played the bigger role in cutting net inflows to inventory.
Weekly Jobless Claims dropped by 29,000 in the period ended July 10, to a level of 429K. The Independence Day holiday and related vacationing likely had something to do with this result. Even so, the four-week moving average fell by 11,750, to 455,250; still a high mark. Economists are looking for a reading of 450K this week.
More housing data comes due at 10:00 AM. Existing Home Sales are due for the month of June, and economists forecast the annual pace of sales decreased to a pace of 5.26 million. That would mark a drop from 5.66 million in May. Supply is still high at 8.3 months, and the situation looks more likely to worsen than improve in June.
The FHFA House Price Index is due at 10:00 AM, but this data point is the least important of the week's reports. The latest data, for April, showed prices rose 0.8% month-to-month but remained down 1.5% from the prior year period.
Leading Economic Indicators are due for report at 10:00 AM. While indicators increased in May by 0.4%, the drivers behind it were suspect. Economists see June's economic indicators declining by 0.3%, which is in line with our economic forecast.
Bernanke works his way over to the House Financial Services Committee to give semiannual testimony there. A US bankruptcy court will decide on General Growth Properties' request to approve Barclays' (NYSE: BCS) replacing a $400 million loan held by a group led by Farallon Capital.
The EIA Natural Gas Report is on tap for 10:30 reporting. Last week's data covering the period ended July 9 showed net inventory increased by 78 Bcf. Stocks remained 274 Bcf above the five-year average for this time of year.
With no economic reports on tap, the focus will clearly move to Europe. The results of the European bank stress tests are scheduled to be disclosed Friday. The general viewpoint is that transparency will aid the overall market, while pushing many banks in Greece, Portugal, Spain and others to raise capital; Barrons reports that Barclays estimates some $100 billion will need to be raised in aggregate.
In geopolitical matters, Secretary of State Hillary Clinton will attend the meeting of the Association of Southeast Asian Nations.
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.
Inquiries about Wall Street Greek content and advertising services can be emailed to Advertise @WallStreetGreek.com. Article sponsored by Greek-Greek.com.