“We’re into the dog days of summer,” said Michael Sansoterra, portfolio manager at Silvant Capital Management in Atlanta. “We’re not expecting a lot of change next week, no surprises.”
That doesn’t bode well for US stocks, which have been battered by unusually high volatility and fears of a double-dip recession.
The Dow Jones Industrial Average shed 4 percent in the past week, for an 11-percent loss in August. Similarly, the S&P 500 Index dropped 4.7 percent on the week, and the Nasdaq Composite Index dove 6.6 percent.
This week’s economic indicators include the Chicago Fed National Activity Index on Monday, and July new home sales on Tuesday. On Wednesday July durable-goods orders and core capital-goods data are released, along with home-price index data for June. Then on Friday the Commerce Department will revise its second-quarter GDP data.
Also on Friday Fed Chairman Ben Bernanke is scheduled to speak in Jackson Hole, Wyoming, at an annual conference of central bankers. At the same meeting last year, Bernanke signaled plans for a second round of quantitative easing, or QE2, setting off a months-long rally in stocks.
Brian Peery, co-portfolio manager at Hennessy Funds, said it’s going to be a bumpy ride for stocks for the next few weeks. He expects “moderate at best” housing and GDP revision data showing subpar economic growth.
As for Jackson Hole, Peery doesn’t think a third round of quantitative easing is in the Fed’s game plan.
“The Fed still has other arrows in their quiver other than QE3: They can buy long-dated Treasuries to flatten the yield curve or cut interest on bank deposits held at the Fed to encourage more lending,” he said. “Personally, I would be very surprised if they pull out the QE3 arrow. You never know, though: I was surprised last week that they included the 2013 language.”
Silvant’s Sansoterra further downplayed the upcoming Jackson Hole meeting, saying not much of import would come out of it. “The 2013 date is as much hoopla as we’re going to get,” he added.
This week’s economic data may do little to sway sentiment, according to Craig Hodges, president of Hodges Capital in Dallas.
Hodges said he sees a real disconnect between what businesses are telling him and the economy. Even though most companies met or exceeded earnings expectation this past quarter, cheap stocks are continuing to get cheaper as investor pessimism increases. “Right now, computerized trading is in control of the market,” he commented. “I don’t think fundamentals are in play.”
Of the 485 companies in the S&P 500 that have reported quarterly results this earnings season, 71 percent have reported earnings above analysts’ expectations, according to Thomson Reuters.
(MarketWatch)
