Week Ahead: Spotlight Swings Back to the Home Front
Turning the page on what is set to be its most bullish month since the end of the Reagan administration, the focus on Wall Street is set to shift next week back to the health of the U.S. economy through a series of key indicators, highlighted by auto and retail sales figures and then the government’s monthly jobs report.
Bullish traders will be hoping for further confirmation that the U.S. is not on the path for a double-dip recession as they dig through the latest economic data and listen to the Federal Reserve, which is set to wrap up a two-day policy meeting mid-week.
They’ll also be crossing their fingers that there are no more flare-ups in Europe after policymakers achieved a landmark agreement this week that could pave the way for a comprehensive resolution of the sovereign debt crisis there.
Enthusiasm for the European deal sent global markets surging, underscored by a 340-point leap by the blue chips on Thursday that sent them above the psychologically-important 12000 level.
But the focus is likely to swing back to the home front next week as traders try to justify October’s enormous rally, which has put the Dow and S&P 500 on track for their strongest monthly percentage gains since 1987.
On the domestic front, the health of the manufacturing industry will be in focus on Tuesday as the Institute for Supply Management releases its closely-watched index on manufacturing activity.
The markets are also likely to be influenced by Tuesday’s release of U.S. sales figures from the Big 3 auto makers: General Motors (NYSE:GM), Ford (NYSE:F) and Chrysler. Analysts project all three will post gains as consumers continued to spend despite their gloomy feelings about the economy.
Wednesday is Fed day, but don’t expect any major shifts from Ben Bernanke and his central bankers, who have pledged to keep interest rates extremely low for the foreseeable future. Still, the Fed could give new clues about plans to take new steps aimed at stimulating the economy, such as a renewed effort to buy bonds. It could also hint at the seemingly diminished chance of a double-dip recession.
Likewise, retailers such as Macy’s (NYSE:M) and Target (NYSE:TGT) are scheduled to reveal their October same-store sales figures on Thursday. Retail is set to come under new scrutiny as the industry gears up for the kickoff to the holiday-shopping season next month.
But U.S. traders tend to pay the greatest attention to insights on the labor markets, and that will be sprinkled throughout the second half of the week. Leading up to Friday’s crucial report, the ADP private-sector employment report is slated for release on Wednesday and the government’s weekly unemployment claims data are due on Thursday.
After employers added a surprisingly-decent 103,000 jobs to their payrolls in September, Wall Street will be watching to see if payrolls expanded enough this month to bring down the high unemployment rate.
While this quarter’s successful earnings season is beginning to wind down, a number of major companies are scheduled to hit the earnings stage next week, including MasterCard (NYSE:MA), Pfizer (NYSE:PFE), Time Warner (NYSE:TWX), Kraft (NYSE:KFT), Comcast (NASDAQ:CMCSA) and FOX Business parent News Corp. (NASDAQ:NWSA).
Friday will also pose a key test for another area of the economy: the new-age Internet industry. That’s because Groupon is scheduled to IPO that day, trading on the Nasdaq under the symbol “GRPN.” Even though its valuation will likely only be a fraction of its earlier target of about $30 billion, the IPO will help signal whether or not Wall Street remains enchanted by this burgeoning sector.