Friday, September 13, 2013
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A soft Retail Sales report and benign wholesale inflation reading
provide the backdrop for today's trading action, ahead of next
week's all-important Fed meeting that is expected to usher in the
long-awaited 'Taper.' A report in a Japanese newspaper is
claiming that the administration is getting ready to announce the
appointment of Larry Summers as the next Fed Chairman, with the
announcement coming as early as next week.
On the home front, the August Retail Sales came in weaker than
expected, presenting a mixed picture of the all-important
consumer economy. While the prior month's growth pace was revised
higher, August's numbers missed expectations both on the
'headline' as well as excluding autos and gasoline.
The 'softish' August numbers mirror the overall soft tone of
commentary from big retailers like
) and others on the second quarter earnings calls. But the July
revisions indicate that the economy got off to a good enough
start in Q3. Consumer spending, which accounts for more than
two-thirds of the U.S. economy, was up 1.8% in Q2, and the growth
pace will likely remain in that vicinity in the current period as
The economic calendar is very busy next week, with a host of
housing and factory sector reports on deck. But all eyes will be
on the Fed, which is expected to announce the start of 'tapering'
its monthly bond purchases on Wednesday.
We will also get the Bernanke press conference and FOMC members'
economic forecasts. It will be interesting to see how the Fed's
outlook for next year has evolved since the June meeting when
they modestly raised their forecasts.
Stocks have shrugged the 'Taper' issue altogether lately, even
though 10-year treasury yields remain close to the 3% level.
Investors appear to be betting that improved economic prospects
and the resulting bump in corporate profitability will more than
offset higher interest rates.
Director of Research