| NEW YORK
NEW YORK Aug 9 Wall Street's spotlight will
fall on the consumer next week. Investors will look to earnings
from major retailers and data on consumer spending with the hope
that the numbers will show that Americans have indulged in some
retail therapy in recent weeks.
Good news on the shopping front could provide some potential
catalysts for a stock market that has stumbled a bit of late.
The last two full weeks of earnings season are packed with
consumer bellwethers. Macy's is scheduled to report
results on Wednesday, while Wal-Mart Stores Inc, the
world's largest retailer, will release quarterly earnings on
Thursday, along with upscale department store Nordstrom
and discount retailer Kohl's. Home Depot, Target
and Staples will follow the week after that.
Positive news about consumer spending could give the market
some upward momentum, which has lagged since stocks wrapped up a
strong July. The S&P 500 fell 1.1 percent this week - its
worst weekly performance since June.
In the absence of strong earnings and economic data,
however, analysts say the market is likely to trend lower as
volume thins out heading into the latter half of August.
"We're a consumer-driven economy, so if those earnings come
in shy of expectations, the lack of personnel on Wall Street
could certainly cause some weakness," said Tom Schrader,
managing director of U.S. equity trading for Stifel Nicolaus
Capital Markets in Baltimore.
Earnings on the whole have topped expectations, with 67
percent of the 446 companies in the S&P 500 that had reported
earnings so far beating estimates. About 54 percent of companies
have reported revenue above expectations, exceeding the average
of the past four quarters, but below the historical average.
The consumer discretionary sector has tallied the
second-best earnings growth of the 10 S&P 500 industry sectors,
with 8.5 percent growth in the second quarter, according to
Thomson Reuters data. Consumer staples have been weaker, with
earnings growth at 3.8 percent for the second quarter.
Consumer spending has been restrained by an increase in
taxes at the start of the year, but it is expected to accelerate
during the second half. Growth in the S&P 500's consumer
discretionary sector is second only to the technology
sector in 2013; the consumer discretionary index has climbed
26.6 percent so far this year
Of the 13 S&P 500 companies scheduled to report next week,
four are retailers.
"Any commentary coming out of these late-filing retail
companies is going to be interesting," said Kim Forrest, senior
equity research analyst at Fort Pitt Capital Group in
"We're shifting back to a little broader perspective on how
the economy is doing, how the consumer feels, and how that feeds
back into GDP."
Despite the stock market's pullback in the latest week,
analysts say sentiment about equities remains positive.
U.S.-based stock funds marked their sixth straight week of
inflows in the week ended Aug. 7, while U.S.-based Treasury bond
funds suffered a record outflow of $3.27 billion, according to
Lipper, a Thomson Reuters company.
For the year, the Dow Jones industrial average has
advanced 17.7 percent and the Standard & Poor's 500 Index
has climbed 18.6 percent. The Nasdaq Composite Index has
gained 21.2 percent for the year.
SHOPPING, CPI AND THE FED
In addition to earnings, the coming week's numbers will
include consumer spending and sentiment figures. The economic
data will include a reading on inflation, measured by the U.S.
Consumer Price Index.
On Tuesday, the Commerce Department will release data on
July retail sales. The forecast is for a 0.3 percent gain since
June, with a 0.4 percent rise expected when car sales are
excluded, according to economists polled by Reuters.
July CPI will be released on Thursday. If the CPI figure
comes in between 2 percent and 2.5 percent higher
year-over-year, the Fed is likely to take the data as a sign
that it can start trimming its stimulus as early as September,
said Keith Bliss, senior vice president at Cuttone & Co in New
"If it comes in lower than 2 percent, then I actually think
you'll see the market rally on the news because then people will
say 'OK, they aren't going to taper,'" he added.
Economists polled by Reuters have forecast that July CPI, on
a year-over-year basis, will show a gain of 2.0 percent.
The Thomson Reuters/ University of Michigan consumer
sentiment index will be released on Friday, with a preliminary
reading for August. Expectations are for a small uptick. The
consumer sentiment index hit a six-year high in July on
increased optimism about the current economic climate.
"We are starting to get consumer confidence numbers rising,
which is very normal in a rising stock market," said Leo Kelly,
managing director and partner in HighTower's Kelly Wealth
Management in Hunt Valley, Maryland.
"We have seen gas prices level off, which is a positive, but
mortgage rates are up, and we saw the number of refis go down
significantly, so that's less cash in the consumer pocket."
(Wall St Week Ahead runs every Friday. Questions or comments
on this column can be emailed to: