Just as an aside, let's keep in mind that although Whitney did a great job of keeping people out of bank stocks in the bear market last year, she had a sell or neutral on all banks except for Goldman during theater 145% ascent over the past seven months.
Wednesday: Retails sales declined less than expected in September as the consumer retrenched in the wake of the cash-for-clunkers auto rebate program. Sales fell 1.5% compared to the consensus estimate for a decline of 2.1%. As expected, auto sales plunged 10.4% after a 7.8% jump in August. Also, businesses continue to burn through inventories as the inventories-to-sales ratio nears more normal levels — indicating a much anticipated inventory rebuild, and associated increase in factory output, could soon begin.
Thursday: Inflation remains subdued as the core Consumer Price Index increased 1.5% year-over-year. This gives central banks plenty of leeway in keeping policy rates at ultra-low levels. A number of manufacturing reports, including the Empire State and the Philadelphia Fed surveys, point to continued healing in the manufacturing sector. And finally, weekly jobless claims declined to 514,000, down 7,000 from the previous week and falling to the lowest levels since late last year.
Friday: The factory capacity utilization rate increased from 69.6% to 70.5% – the third monthly increase — as production lines are restarted to meet new order demand. Motor vehicles are a big contributor as dealer inventories were depleted by cash-for-clunkers over the summer and are now being restocked. The University of Michigan's consumer sentiment index for October declined from to 69.4 from 73.5 in the previous month. Analysts were expecting a reading of 74. The expectations sub-index posted a hefty six-point decline as ongoing worries about the job market weighs on consumers.
The Week Ahead
Monday: Tech leader Texas Instruments Inc. (NYSE: TXN) reports earnings after the bell.
Tuesday: Housing starts are reported. We also get an update on inflation courtesy of the latest Producer Price Index.
Wednesday: The Boeing Co. (NYSE: BA) and Morgan Stanley (NYSE: MS) report earnings before the bell.
Thursday: Weekly jobless claims are reported. The Conference Board will release its latest figures for its index of leading economic indicators.
Friday: Existing home sales are reported.
In conclusion, stocks may pause for a week or two to digest recent gains, but it looks to me as if the fourth-quarter beta chase will continue after that spell. Large caps seem to be coming into their won, led by the once-lagging energy group. It may be time to deemphasize tech and banks in portfolios and boost the level of energy.
