The "Morning Greek" replaces your old "Wake Up Call" article that was a perennial favorite here at the blog. It is your premarket report, giving you all the important market moving news of the morning, including especially economic data, overseas news and corporate events of interest. The "Greek Factor" ranges from +3 to -3, and is a subjective measure of "The Greek's" view of the market impact of individual and aggregate news events and factors. While many of the economic data points of the day came in better than expected, we see the absolute level of activity still weak. Also, we note that several retail factors, including same-store sales & Wal-Mart's report should slap traders on the back of the neck before too long this morning and send stocks back downward.
Markos N. Kaminis earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, and Mr. Kaminis has appeared across major media. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.
Your Tuesday will be just as busy as the day before, with five economic reports reaching the market before the open. We received Housing Starts shorter than expectations, a hotter Core PPI than expected, better than forecast industrial production, an inflation warning from the Bank of England and a miserable bit of retail sector news from Wal-Mart. Enjoy!
Housing Starts Greek Factor: -1
We said:"There could be a slight increase in July's Housing Starts, as Building Permits edged higher in June. Whatever happens, we're not looking for a significant and market stimulating data-point here." Starts came in up 1.7% above the revised lower June mark of 537K (from 549K). The annual pace of Starts, running at 546K in July, missed the economists' consensus forecast for 565K.
Producer Price Index Greek Factor: +3
The Producer Price Index surprised both economists and The Greek this morning, as July's Core PPI, which excludes volatile food and energy prices, jumped 0.3%. Economists were looking for a Core rise of 0.1%. The Headline PPI figure came in up 0.2%, which was in line with the economists' view. Since this data-point runs counter to deflation concerns, it proves a net positive factor in today's premarket.
BOE Raises Inflation Warning Greek Factor: 0
The Bank of England today raised a surprising concern; that being inflation. How wonderful! So now we have no idea where to look for trouble. It could come from deflation or inflation? Hey, how about stagflation then too, since economic growth is likely to lag. We have to give this a neutral market factor, since it offsets more pressing global deflation concerns. We happen to share the BOE's long-term inflation concerns, as we see paper currency losing ground against all goods. Look for the return of the gold standard eventually even!
Industrial Production Greek Factor: +2
Industrial Production increased a full point in July, versus economists' expectations for a 0.6% increase. This represents a small portion of the American economy folks, and this number measures July, so temper your enthusiasm. Also, the absolute level of activity is not enthusing, and manufacturing has shown signs of slowing of late. Capacity Utilization moves in line with production, and increased to 74.8%, against expectations for a 74.5% gain. My feeling is that the market will value this more than it's really worth, so the +2 mark versus what I would give it normally, +1.
Weekly Same-Store Sales Greek Factor: -1
Sales deteriorated further in the August 14 period, with the week-over-week comparison losing 1.3%. The yearly comparison still shows growth of 3.3%, but that's down from last week's 3.7% change. We also remind that last year's comparable economic activity was simply the worst in generations. Redbook showed a 2.7% increase against the prior year, versus 3.0% last week. We only rate this factor a negative one because it's not as widely followed by the general investing public as other economic metrics. Otherwise, we would be raising more concern for traders today. It should impact downgrade activity in the retail sector, unless analysts want to feel the back-to-school season out a bit longer.
China Leading Economic Index
The Conference Board's check up of China's Leading Economic Index shook up stocks in June. That report covered the month of April, and May's data showed a 0.8% increase to an index mark of 145.8. Tuesday offers the Board's check for June, and will be closely followed by investors.
The US Treasury and Housing Department will have a forum including PIMCO's Bill Gross, within which they will work on ideas for the futures of Fannie Mae (OTC: FNMAS.OB) and Freddie Mac (OTC: FMCC.OB). At 12:30 PM ET, Minneapolis Federal Reserve Branch President Narayana Kocherlakota will speak at Northern Michigan University.
Wal-Mart is an economic barometer. It is the most significant American retailer by far and influences all sector index activity and relative economic metrics. Thus, its EPS report matters to the market in a big way.
NYSE: WMT shares were up about a percentage point in the pre-market, given its EPS results. Most importantly for WMT investors, the company raised its earnings guidance for the full year ahead. WMT beat EPS estimates by a penny, earning $0.97, but the gains came mostly on cost management. All the news was not good, and the market might turn negative on the rest of the economy and retail sector based on the report. You see, same-store sales for stores open at least a year fell 1.4% on weakness in its US namesake stores. That's bad news for the general economy, so while WMT might be rising this morning, the message is sell retail generally.
The Gamescom trade fair starts in Cologne, Germany. The corporate news wire highlights the Men's Wearhouse (NYSE: MW) meeting with analysts and major earnings reports from Wal-Mart (NYSE: WMT) and Home Depot (NYSE: HD). Also look for reports from Analog Devices (NYSE: ADI), Abercrombie & Fitch (NYSE: ANF) and CF Industries (NYSE: CF).
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