The Week Ahead: Wall Street Awaits April Jobs Data
Schaeffer's Editorial Staff
Here is a brief list of some of the key events this week. All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.
Monday
The week kicks off on Monday with data on personal income and spending, as well as the Chicago purchasing managers index (PMI).
We'll hear earnings results from Anadarko Petroleum (APC), Herbalife (HLF), Humana (HUM), LDK Solar (LDK), Shutterfly (SFLY), Sohu.com (SOHU), Sourcefire (FIRE), and Veeco Instruments (VECO).
Tuesday
Tuesday's economic calendar features the ISM manufacturing index, construction spending, and auto sales.
On the earnings front, quarterly reports are due out from Arch Coal (ACI), Avon Products (AVP), Biogen Idec (BIIB), BP (BP), Broadcom (BRCM), Chesapeake Energy (CHK), Office Depot (ODP), OpenTable (OPEN), P.F. Chang's China Bistro (PFCB), Pfizer (PFE), Sirius XM Radio (SIRI), and Valero Energy (VLO).
Wednesday
The ADP private-sector payrolls report is due out on Wednesday, along with factory orders and the usual report on weekly crude inventories.
Comcast (CMCSA), CVS Caremark (CVS), Garmin (GRMN), Hartford Financial Services (HIG), JDS Uniphase (JDSU), MasterCard (MA), Onyx Pharmaceuticals (ONXX), Time Warner (TWX), ValueClick (VCLK), Visa (V), Weight Watchers (WTW), Whole Foods Market (WFM), Yelp (YELP), and Zillow (Z) are all scheduled to step into the earnings confessional.
Thursday
Employment data continues to roll in on Thursday, when the latest weekly jobless claims will share the spotlight with the ISM services index.
Earnings are expected from Alpha Natural Resources (ANR), American International Group (AIG), Fuel Systems Solutions (FSYS), James River Coal (JRCC), Level 3 Communications (LVLT), MGM Resorts (MGM), Randgold Resources (GOLD), Royal Gold (RGLD), Southwestern Energy (SWN), SunPower (SPWR), and Western Refining (WNR).
Friday
The week wraps up with the Labor Department's report on nonfarm payrolls and the unemployment rate.
We'll hear earnings from Arcos Dorados (ARCO), Duke Energy (DUK), Estee Lauder (EL), Exelon (EXC), and The Washington Post (WPO).
And now a few sectors of note...
Sector
Leisure/Retail
Bullish
Outlook: The jobs market appears to have hit a soft patch lately, with March payrolls falling short of expectations. However, consumer spending remains healthy, with a 2.9% uptick in this metric during the first quarter adding two percentage points to gross domestic product (GDP). In fact, retailers managed a composite same-store sales gain of 6.9% for March, surpassing the 5.3% improvement predicted by analysts. What's more, overall retail sales improved 0.8% last month, blowing past the consensus analyst estimate of 0.3%. On the charts, the SPDR S&P Retail ETF (XRT) is still a technical outperformer, with the fund notching its highest weekly close on record last Friday. The fund enters this week trading just below its all-time high of $63.04, which was tagged just last month. For those seeking a bullish play in the retail/leisure space, we recommend focusing on stocks in solid technical uptrends that are surrounded by negative sentiment, which creates the potential for upside surprises. Last week, well-received earnings from O'Reilly Automotive (ORLY) provided a halo lift for a few of our preferred retail names, AutoZone (AZO) and Advance Auto Parts (AAP). Other current favorites include Macy's (M), Limited (LTD), and Whole Foods Market (WFM), along with restaurateurs Chipotle Mexican Grill (CMG) and Domino's Pizza (DPZ). With skepticism still lingering toward these consumer-dependent stocks, contrarians can continue to capitalize on situations where sentiment has yet to catch up with the bullish technical performance.
Sector
Homebuilding
Bullish
Outlook: The housing sector was an unexpected pocket of strength last week, thanks to upbeat data on pending home sales and a better-than-forecast earnings report from Ryland Group (RYL). On the heels of this positive news, the SPDR S&P Homebuilders ETF (XHB) bounced from support at its 80-day moving average, located near the $20 level -- a round-number area that previously marked the fund's May 2010 peak. From here, the fund still has room to rally up to $23.25, which is half its all-time high, reached only three months after XHB was launched in 2006. Despite the improving price action in the sector, analysts remain overwhelmingly negative. With 85% of builders trading above their 200-day moving averages, these names have attracted only 44% "buy" ratings from brokerage firms. However, a recent preponderance of put buying on XHB suggests that hedged players are starting to dip their toes into housing stocks, which could be a boon for the group during the near term. In fact, the 50-day buy-to-open put/call volume ratio for the fund is now resting near its highest level since 2007, which indicates that big-money investors are actively acquiring shares of sector components. As further evidence, Goldman Sachs is launching a fund to buy home-loan bonds, with the investment giant asserting that "stabilization in U.S. housing fundamentals is creating an attractive investment opportunity." Some of our preferred names in the sector are Lennar (LEN), Toll Brothers (TOL), Meritage Homes (MTH), PulteGroup (PHM), and D.R. Horton (DHI), all of which sport relatively high short-to-float ratios. Going forward, these stocks could benefit from upgrades or short-covering activity as the technical and fundamental performance continues to surpass the Street's low expectations. As a point of caution, Barron's recently featured an upbeat cover story titled "Home Prices Ready to Rebound" -- suggesting some optimism may be priced in, and XHB could pull back in the short term. However, a pullback that is contained above $20 would be healthy, in our view, as we still believe in the potential reward in this sector. What's more, the bullish cover is not out of touch with the positive price action, making the contrarian implications less relevant.
Sector
Gold
Bearish
Outlook: Lately, we've been seeing several danger signs that point to potential short-term weakness for the SPDR Gold Trust (GLD). First, as Jim Paulsen of Wells Capital Management recently observed, valuations for the underlying metal relative to stocks, bonds, and other assets have soared off the charts lately, hinting that a correction may be overdue -- particularly as gold sheds its "fear premium" in the face of recovering consumer confidence. Looking at the options markets, total buy-to-open option volume on the ETF imploded recently, and continues to decline. This occurrence has previously coincided with periods of range-bound or negative price action for GLD. Meanwhile, the fund's front-month put/call implied skew has recovered from its recent lows, but this has yet to provide any kind of meaningful bid for the shares -- marking a deviation from past trends. From a technical perspective, the outlook is similarly unsettling. The fund turned lower in late February after an unsuccessful test of resistance in the $175 area, and GLD has since plummeted through its 140-day moving average. This trendline has played a key role as both support and resistance in the past, and it's currently serving as a stubborn technical ceiling. Even more troubling, many technicians are now betting on an inverse head-and-shoulders pattern for GLD -- interestingly enough, a formation that was not at the forefront of technical playbooks when it developed in the equities market. If this pattern doesn't play out as expected on GLD, some technical-related selling could be expected. That said, we're keeping a close eye on its 320-day moving average and the $160 area, which could limit downside during the short term.
