Weekly Economic Indicators: Retail and Manufacturing Focus

The economic release schedule for the week of February 4th is as follows:

  • Monday:  Factory Orders
  • Tuesday:  ICSC-Goldman Store Sales and ISM Non-Mfg Index
  • Wednesday:  MBA Purchase Applications and Treasury STRIPS
  • Thursday: Chain Store Sales, Weekly Jobless Claims, Productivity and Costs, Consumer Credit, Fed Balance Sheet
  • Friday:  International Trade and Whole Trade

I spoke with Gordon Charlop Ph.D., Managing Director, Rosenblatt Securities, and frequent CNBC commentator, about what he will be watching. This week Charlop will focus on the overall market, 4th quarter earnings, weekly jobless claims, retail data.

Overall Market

With the equity markets at a 5 year high, Charlop is expecting a brief pull back for some profit taking. However, he said the factors are setting up for a rally. Issuer sentiment is strong after a wave of companies have bought back their shares and beat estimates despite lowering guidance. He is also forecasting a pickup in M&A activity, particularly in this low interest rate environment. He added that the Federal Reserve’s obligations are to get people employed. The central bank’s monetary policy is starting to gain traction; the economic indicators are also starting to look better; and congress seems to be embracing the mandate that policy changes need to be implemented. He is expecting the DJIA to crack the 14500 mark by the end of the 1st quarter, with the S&P 500 remaining above the 1500 level, even after some retracements. He said the average investor may have missed this rally, but he believes other opportunities are coming. Most importantly the shorts are getting squeezed, including both short squeeze and performance squeeze.

4th Quarter Earnings Season

Charlop continues to believe that top line growth will drive the recovery and he emphasizes that the numbers are proving it, as the revenue numbers are looking better for the 1st quarter. He is expecting about 2.5 % growth for the quarter, with a strong base. He cautioned “you don’t want the growth to heat up too fast; you want it to gradually increase and support its own weight.” According to Charlop, the credit market is still driving this rally; public companies are issuing debt and insurers and other participants keep acquiring debt.

Weekly Jobless Claims

The American economy is built on the tech and financial sectors, these segments are the quintessential growth engines for a recovery. The other region that is very important is employment, and lower unemployment is the key to getting this economy back on track. Small businesses and entrepreneurs will have to start hiring people and become more profitable. Charlop says the economy will not be healthy until the unemployment numbers drops below 300,000 and the U6 numbers drop below 10.

Retail Data

Charlop explains retail data is important as it shows consumer confidence in the equity market. It also provides a pulse of the health of the economy. Although this is not the best period for retailers, he is expecting many of them to beat forecasts.

Buzz on the Trading Floor

Charlop is starting to feel that the longs are taking over; he sees motivated buying and some pick up in interest in volume. There is “a sense of quiet optimism” emerging.

Charlop’s Gripe

Charlop says Mary Joe White, the recently named SEC Chairwoman, knows the game, and he is hopeful that she comes in and finds the right regulatory balance, bringing some dynamic forces into the equity market.