RPT-Wall St Week Ahead: Stocks face retailers’ results

(Repeating column initially transmitted late on Friday)

By Caroline Valetkevitch

NEW YORK, Aug 15 (BestGrowthStock) – U.S. stock investors will
brace for further signs of weakness in the economic recovery
this week as earnings from key retailers are expected.

Industrial production, housing starts and inflation data
will come under scrutiny as well, after stocks on Friday
wrapped up their worst week in six. Last week’s sell-off also
drove stocks back into negative territory for the year.

Technical charts show “sell” signals, indicating more
weakness. At the same time, some analysts say the market may
be due for a bounce.

Wal-Mart Stores (WMT.N: ) is expected to announce results
along with top tech names such as Hewlett-Packard (HPQ.N: ),
which has been in the spotlight since its CEO’s resignation on
Aug. 6 after the closing bell.

So far this earnings period, some 75 percent of results
from Standard & Poor’s 500 (.SPX: ) companies have beaten
earnings estimates, according to Thomson Reuters estimates,
offsetting a batch of economic reports that pointed to a
slowdown in the recovery.

But for retailers, which typically round out the earnings
period, results have been less optimistic. If forecasts from
J.C. Penney Co Inc (JCP.N: ) and others are any indication,
reports this week could confirm concern about a weaker outlook
for the sector.

“The tone among retailers has changed somewhat, and the
outlook now looks somewhat less upbeat than it did earlier
this year in the retail space,” said Michael Sheldon, chief
market strategist at RDM Financial in Westport, Connecticut.

“We’re likely to hear more about somewhat sluggish
consumer spending.”

J.C. Penney forecast a profit for the year below Wall
Street’s expectations last week and said its customers were
vulnerable to weak economic conditions, a day after department
stores Kohl’s Corp (KSS.N: ) and Nordstrom’s (JWN.N: ) gave
conservative profit outlooks.

The Federal Reserve also gave a bleaker outlook on the
economy last week.

BEWARE OF FALLING SOX

Technology shares led losses on Friday, with the Nasdaq
ending the week down 5 percent, while the Dow fell 3.3 percent
and the S&P 500 slid 3.8 percent.

An index of semiconductors (.SOX: ) dropped more than 4
percent last week, ahead of results late on Wednesday from
Cisco (CSCO.O: ), while the SOX broke through the lower end of
its trading range on Thursday following Cisco’s weak revenue
forecast.

On Friday, the SOX ended down 0.9 percent.

This week, the SOX will be watched closely when Dow
component and technology bellwether Hewlett-Packard reports
results.

Hewlett-Packard, whose chief executive resigned following
an investigation into sexual harassment charges brought by a
female contractor, is due to report earnings on Thursday.

READING THE TECHNICAL TEA LEAVES

Charts show short-term momentum turned negative this week.
The S&P 500 closed below its 14-, 50- and 200-day moving
averages and the moving average convergence-divergence
generated a “sell” signal.

The negative slopes on the 14- and 50-day moving average
also indicate weakness.

The Relative Strength Index, or RSI, and the Bollinger
Bands show the S&P 500 has not reached oversold levels, and
support for the index is seen around the 1,060-to-1,057 area,
with 1,060 as the 23.6 percent retracement of the 2010
high-to-low slide between April and July, and 1,057 the low in
a mid-July pullback.

Still, some analysts say stocks may be ripe for a bounce
this week following the recent weakness.

“I think the tone is negative, but I think the market is
trying to go higher,” said Terry Morris, senior vice president
and senior equity manager for National Penn Investors Trust
Company in Reading, Pennsylvania.

“The (Federal Reserve) meeting is out of the way, and some
disappointing economic numbers, and I think that all spells a
higher market” this week, he said.

On Friday, the S&P 500 ended down 0.4 percent, but traded
near flat for much of the day.

The overall sentiment in the options market was slightly
bearish, but the CBOE Volatility index (.VIX: ), Wall Street’s
favorite barometer of fear, suggested investors should not be
too worried for now.

August VIX futures that expire this Wednesday were trading
on Friday just a tick above the VIX, which rose 2 percent to
close at 26.24.

“Considering that these are futures that expire in 3 1/2
trading days, the market is not bracing for anything too
volatile (for this week) at least,” said Randy Frederick,
director of trading and derivatives at the Schwab Center for
Financial Research in Austin, Texas.

Industrial production data is due on Tuesday, along with
housing starts and the U.S. Producer Price Index. All the data
will be for July.

On Friday, the government said the overall U.S. Consumer
Price Index rose 0.3 percent in July. It followed some concern
about deflation expressed by the Fed earlier last week.

“Given the sensitivity to the Fed statement earlier this
week, all of those items will probably get a little more
scrutiny than normal,” said Fred Dickson, chief market
strategist of The Davidson Cos. in Lake Oswego, Oregon.

EYES ON RETAILERS’ REPORT CARDS

But the long list of retailers slated to report this week
should attract plenty of attention as well, especially given
that parents and students are preparing for the start of
another school year. School is already in session in some
states, while it will resume elsewhere after the Labor Day
weekend.

Besides Wal-Mart and HP, results are expected from Target
Corp (TGT.N: ), Urban Outfitters (URBN.O: ), Abercrombie & Fitch Co
(ANF.N: ), The TJX Co (TJX.N: ), Limited Brands (LTD.N: ), Gap
(GPS.N: ), Sears Holdings Corp (SHLD.O: ) and Staples (SPLS.O: ).

Home-improvement chains Home Depot (HD.N: ) and Lowe’s Co
(LOW.N: ) also are due to report, along with Intuit (INTU.O: ).
(Wall St Week Ahead runs every Sunday. Questions or comments
on this column can be e-mailed to:
caroline.valetkevitch(at)thomsonreuters.com)
(Reporting by Caroline Valetkevitch; Additional reporting by
Rodrigo Campos and Angela Moon; Editing by Jan Paschal)

RPT-Wall St Week Ahead: Stocks face retailers’ results