It's back to business in the holiday-shortened coming week as traders return to face a traditionally rocky month for stocks.
"The vacation season is over, and the A-teamers will be coming back," says Larry Wachtel, senior market analyst at Wachovia. "And they better have their game faces on because September is the market's toughest month according to the
Stock Trader's Almanac
In terms of trading patterns, Phil Roth, chief technical market analyst at Miller Tabak, says, "September usually starts strong and ends weak, so the second half of the month is probably the more important test." Roth's annual market model consistently has a low mapped in between September and mid-November, and he expects 2006 to follow that pattern.
September may be scary, but then again, August typically is as well. But that did not stop the indices from having a surprising late-summer rally. For the month of August, the
rose 1.8%, the
added 2.2% and the
Furthermore, some traders say the recent spate of benign economic data, as well as lower oil prices, are setting the table nicely for a fall rally.
"The faucet won't get turned on to full immediately, but the volume will gradually increase over the course of the next week," says Larry Perruzi, equity trader at Boston Company Asset Management. "And when it does, we could see stocks move higher because the news has generally been good."
Unfortunately, returning traders won't have much economic data to help them get up to speed.
The first reports of the week come Wednesday, with the release of revised second-quarter productivity data. According to Thomson First Call, the consensus estimate is for growth of 1.6%, up from the prior report of a 1.1% increase.
The ISM services index also is scheduled to hit the market Wednesday, and economists anticipate the reading will rise to 55 from 54.8 in July.
Beige Book, which compiles economic data from each of the Fed's 12 districts, will be released Wednesday as well. Jason Schenker, economist at Wachovia, believes it's the biggest release of the week because it will shed additional light on the Fed's mindset.
"The beige book will show some regional moderation in growth, most likely in the mid-West, where auto production plays a big factor in local economies," he says. "We should also see some moderation of pricing pressures."
On Thursday, July wholesale inventories will be announced. Economists forecast an increase of 0.7%, down from 0.8% growth the prior month.
Finally, consumer credit data for July come out on Friday. Economists expect a rise of $7 billion.
Handful of Earnings
The market may be closing in on third-quarter preannouncement season, but a few companies are still waiting to announce results for their recently ended quarters.
Companies scheduled to report earnings Tuesday include
will be in the spotlight. The homebuilder already signaled last month that it has been hit by the housing slowdown, reporting a drop in orders and slashing its earnings estimates. At the time, the company estimated earnings of $1.10 to $1.20 a share for the quarter ended July 31, down from $1.76 last year.
According to Thomson First Call, analysts have an average projection for earnings of $1.10 a share and revenue of $1.49 billion.
Thursday has a smattering of earnings, including
Jos. A Bank Clothiers
is slated to announce quarterly results on Thursday, as well. Analysts expect the chip company to post fiscal first-quarter earnings of 32 cents a share, up from 24 cents last year, on $541 million in revenue.
TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.