Coming Week: Walking the Line

Arguably, the most important report comes from Nordstrom (JWN Quote), whose stock is up over 60% in the past six months and has more than doubled over the past two years. Nordstrom is a leader in a luxury segment that, to date, has suffered no ill effect from a housing slowdown that has crippled comparable homebuilders such as Toll Brothers (TOL Quote).

Nordstrom's results take on added importance because while the U.S. economy is driven by overall consumer spending, said spending is increasingly driven by high-end consumers.

"From a macro perspective, the income distribution has become more uneven in recent years, suggesting that low-income households account for a smaller share of total consumer spending than they used to," writes Torsten Slok, senior economist at Deutsche Bank. "The share of income received by the wealthiest 20% of the population has been rising steadily ... from 43% in 1973 to over 50% in 2005. The share of income received by the poorest 20% of the U.S. population has declined since 1970 from 4.1% of income to 3.4% most recently."

Such statistics help explain why most economists and Federal Reserve officials are less alarmist than the press about recent subprime problems, most recently evidenced by NovaStar Financial's (NFI Quote) implosion last week.

Indeed, the subprime space is only a "sliver" of the overall mortgage market, Fed Governor Susan Bies said Tuesday. Furthermore, spending by the increasingly less important (from a macro perspective) low-end consumer is unlikely to be materially damaged by problems in the subprime sector "as long as unemployment remains fairly low," according to Slok.

(On a jobs-related note, February nonfarm payroll data will be released on the second Friday in March, rather than the first as is typical, because February is a short month and the government needs extra time to get it "right" -- before subsequent revisions, of course.)