Monday, May 14, 2012
With nothing major on the domestic economic calendar today and
the earnings season winding down, the market's focus will remain on
the unsettling developments in Europe, where the Greek political
deadlock is increasing the odds that the country may not have a
future within the common currency union.
The resulting anxieties are pushing German and U.S. Treasury
yields lower and putting an uncomfortable spotlight on the Italian
and Spanish government bond markets. Yields on Italian and Spanish
government bonds have been trending up in recent days, though they
remain below levels that could restrict the countries' access to
capital. Spain's position is particularly fragile given the
country's hobbled banking sector. The country's banking regulator
asked financial institutions late last week to set aside a combined
€30 billion in additional loan-loss reserves. But many, including
Moody's, the rating agency, believe that they will remain
vulnerable even after fully complying with the government's
provisioning requirement.
We don't have much on the economic calendar today, but we do
have a number of market-moving economic reports on the docket the
rest of this week. These include readings on retail sales,
inflation, housing, and the manufacturing sector. Of particular
significance would be the April Retail Sales report coming out
Tuesday morning and the April Housing Starts numbers Wednesday
morning.
Retail Sales are expected to show a flat reading following the
very strong gains in March, but would nevertheless be consistent
with a roughly 2.5% gain in annualized personal consumer
expenditures (or consumer spending) in second quarter GDP. Please
recall that PCE in the first quarter increased at a 2.9% annualized
pace. On the Housing Starts front, the expectation is for the first
meaningful increase since January, with Starts reaching 689K from
March's 654K level. Other major reports this week include CPI,
Industrial Production, and the Empire State/Philly Fed regional
manufacturing surveys.
The first quarter earnings season is fast winding down, with
results from 452 of the S&P 500 already known. Earnings reports
have overall been better than expected, with an aggregate earnings
growth of 7.9% and 65.5% of companies beating expectations. We have
21 S&P 500 companies on tap to come out with results this week,
including a number of bellwether retailers like
Wal-Mart
(
WMT
),
Target
(
TGT
),
Home Depot
(
HD
), and
J.C. Penney (
JCP
)
.
Groupon
(
GRPN
) will report results after the close today.
Sheraz Mian
Director of Research
GROUPON INC (GRPN): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
PENNEY (JC) INC (JCP): Free Stock Analysis
Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
Report
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