Monday, March 26, 2012
The market appeared to lose its momentum last week for the first time this year as global growth worries overtook optimism about the U.S. economic scene. Even so the pullback is modest relative to the gains thus far this year, and could easily get reversed given this week’s potentially market moving releases. The more likely course for the market is a period of consolidation over the coming days ahead of the coming earnings season that is now only a couple weeks away.
This week’s releases start with Pending Home sales that come out after the open today and is expected to show an improvement over the preceding month. Last week’s New Home sales and Housing Starts misses aside, the housing sector is showing unmistakable signs of stabilization. The most important driver of this favorable trend is the ongoing labor market improvement and the enhanced buying power that comes with it. We should see the impact of the labor market developments in Tuesday’s Consumer Confidence reading from Conference Board and Friday’s measure from the University of Michigan. Wednesday’s Durable Goods report is expected to show a significant improvement from January’s decline.
Friday’s Personal Income & Outlays report has the potential to cause positive revisions to current quarter GDP estimates. The final read on the fourth quarter 2011 GDP report on Thursday could be significant for the same reason as it could cause upward revisions to the current quarter growth estimates. The key component in the Thursday GDP report will be Personal Consumption Expenditures or consumer spending. Upward revision to fourth quarter consumer spending would show greater momentum coming into the current quarter than initially expected, likely causing growth expectations to go up.
In corporate news, shares of Lions Gate Entertainment (LGF) will be in the spotlight following the weekend success of its ‘Hunger Games’ movie. Cal-Mine Foods (CALM), the producer and marketer of eggs, came ahead of EPS expectations but missed on revenue and indicated continued feedstock cost pressures. In other news, Hewlett-Packard’s (HPQ) announced a 10% increase in quarterly dividend.
Director of Research
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