The Market Update
Weekend Linkfest, Part 2
Barry Ritholtz
04/29/07 - 02:53 PM EDT
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Yesterday, we looked at the week that was. Today's linkage looks at the coming week.
This week will be about earnings and payrolls. Following that fugly GDP number, Friday's nonfarm payroll report will be watched with even greater interest, particularly for what it reveals about wage inflation. The consensus is for 120,000 new jobs. (It takes 150,000 to keep up with population growth.) The biggest drag on job growth has been construction and manufacturing.
Other economic data this week:
Monday: personal income and spending. Tuesday: vehicle sales (consensus is for a 3% decline) and the Institute for Supply Management's manufacturing index. Wednesday: March factory orders. Thursday: first-quarter productivity, and ISM's service-sector index. Friday: jobs report.There is still a slew of earnings coming out, and while the profits have been coming below last quarter's numbers, they are still way above the lowered 3%-to-4% analysts consensus. Year over year, we're running about 7% so far. On Monday, Verizon(VZ Quote) reports. On Tuesday, we'll see Procter & Gamble(PG Quote) and Archer Daniels Midland(ADM Quote). Time Warner(TWX Quote) is due Wednesday. GM(GM Quote), Starbucks(SBUX Quote) and CBS(CBS Quote) all report Thursday. Eastman Kodak(EK Quote) finishes the week with results on Friday. (There's speculation that Kodak is a private equity target.) We get a lot of speeches this week also: Fed Chairman Ben Bernanke, Treasury Secretary Hank Paulson, St. Louis Fed President William Poole, New York Fed President Timothy Geithner and Kansas City Fed President Thomas Hoenig. Any of these gentlemen can move the markets, so keep an ear out. With the Dow up 19 of the past 21 days, a pullback is overdue. The timing, however, is anyone's guess. Onto the Sunday clicking!
That's your weekend two-fer. Let us know if you prefer this format to one longer Linkfest, by sending an email here. Enjoy what's left of your weekend -- it's Sopranos and Entourage night!INVESTING & TRADING
Two views on the market:- Top market timers staying strong on stocks. (MarketWatch) - Technically Speaking, This Bull Needs a Break. (Barron's) Jeremy Grantham: All the World's a Bubble: TheStreet.com gave some coverage this week to Grantham's cautions. "He has upped his concerns in his latest letter to shareholders. Grantham says we are now seeing the first worldwide bubble in history covering all asset classes. Everything is in bubble territory, he says. Everything." Grantham has studiously avoided television during his long career, but on Monday morning, I will be discussing his views on CNBC. Mark Hulbert gives some pretty straightforward advice: Do Your Homework (or Buy an Index Fund). (The New York Times) Michael Steinhardt laments the state of the investment industry: He "launched his hedge-fund firm 40 years ago and quickly became an industry giant, doesn't think much of some of the people making huge fortunes in the business today. Back when he started, he says, hedge-fund chiefs were members of 'a very limited, elite group that had mystery and excitement and élan. Now, it's all about making money for the managers.'" (Barron's) Has Amazon.com fixed its profitability problem? Amazon(AMZN Quote) shares had a boffo week, gaining 40% in two days. (MarketWatch) Boom Time: Russia's Abundant Oil and Gas Reserves Are Powering up the Economy. "The South Korean miracle: Which developed country's stock market currently trades at a 10.7 price-to-earnings ratio, despite sporting a 4.3% inflation-adjusted growth rate for its gross domestic product?" (MarketWatch) Dollar Touches a New Low Against Euro: "The dollar on Friday touched its lowest point against the euro since the common currency's birth in 1999, reflecting slowing U.S. economic growth and fueling expectations that the dollar might not hit bottom for several more months." (free in The Wall Street Journal) China Tells Banks to Set Aside More Money as Reserves: "China ordered banks to set aside more money as reserves for the seventh time in 11 months to try to prevent the world's fastest-growing major economy from overheating. Lenders must put aside 11 percent of deposits starting May 15, up from 10.5 percent, the central bank said on its Web site." (Bloomberg)
ECONOMY
The Wall of Worry continues to build: I asked readers what sectors of the economy are being impacted by the housing slowdown, and you folks came up with quite a list: Housing Slowdown Sector Impact. Fascinating stuff. The U.S. Economy: Prospects and a Puzzle Revisited: San Francisco Fed President Janet Yellen made a speech recently, and made the most explicit acknowledgement of the economic deceleration and its potential impact of any Fed member; I guess the business cycle hasn't been repealed. (San Francisco Federal Reserve) GDP Data Release (and primer) Want to know how GDP is assembled? A quick primer. Fitting Growth Data Into the Unemployment Puzzle: "With the economy growing so slowly, why is unemployment falling? Explanations range from measurement problems to the peculiar behavior of construction jobs to the possibility that productivity growth is easing." (free in The Wall Street Journal) See also: Output and jobs pose statistical mismatch. (FT)
HOUSING
U.S. House Prices Slide As Property Glut Grows: "Tighter credit and a growing glut of properties are depressing an already weak U.S. housing market, wrecking the industry's hopes for an early rebound. That leaves buyers in a strong position to negotiate for bargains during the spring home-shopping season, the busiest time of the year for housing sales." (Real Estate Journal.com) US new home market may take til 2009 to rebound - S&P: Recovery of the U.S. market for new homes could take another year if trouble in the adjustable-rate subprime mortgage market spreads to other types of residential lending, credit-rating agency Standard & Poor's said on Monday. (Reuters) 'Liar Loans' Fuel Bust With $1 Billion Fraud: "Cheating on mortgage applications is so widespread and so seldom punished that it's fueling an increase in foreclosures that will prolong the housing slump, said Robert W. Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans." (Bloomberg)
POLITICS/TAXES
Homeowners Wage a Tax Rebellion: "Falling home prices and rising property-tax assessments are fueling a grass-roots tax rebellion ... Tax assessments didn't keep pace with soaring property values in recent years. Now, assessments are catching up at the worst possible time, just as property prices soften." (free in The Wall Street Journal) Congress Wrangles Over Bush's Expiring Tax Cuts. This is a surprisingly blunt assessment from Bloomberg's John Berry: "Republicans have only themselves to blame, because the expiration dates were set originally to mislead the public about the amount of revenue loss involved. Of course, from the beginning the plan was to argue that letting the cuts expire would impose tax increases that would harm the economy and cost jobs..."
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