Wall St Week Ahead: Retailers’ results may sway stocks

By Caroline Valetkevitch

NEW YORK, Aug 13 (BestGrowthStock) – U.S. stock investors will
brace for further signs of weakness in the U.S. recovery next
week as earnings from key retailers are expected.

Industrial production, housing and inflation data will
come under scrutiny as well, just as stocks wrapped up their
worst week in six. This 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 came into the spotlight this week after its CEO’s
resignation late last Friday.

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 next 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.”

On Friday, J.C. Penney forecast a profit for the year
below Wall Street’s expectations 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 this week.

BEWARE OF FALLING SOX

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

An index of semiconductors (.SOX: ) fell more than 4 percent
on Wednesday ahead of results from Cisco (CSCO.O: ), while the
index 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.

The SOX will be watched closely next week 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 1,060-1,057 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
next 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 next week,” he said.

The S&P 500 ended Friday’s session 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 shouldn’t be
too worried for now.

August VIX futures that expire next Wednesday were trading
just a tick above the VIX, which rose 2 percent on Friday 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 next 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 government’s Producer Price Index
report.

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

“Given the sensitivity to the Fed statement earlier this
week, all of those items (next week) 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 next week
should attract plenty of attention as well, especially given
that parents and students are preparing for the start of
another school year in the next few weeks. School is already
in session in some states, while it will resume in other
states 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 Friday. 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)

Wall St Week Ahead: Retailers’ results may sway stocks