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Consumer Data, Retail Earnings In Focus For Stocks After Monday Gains

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February 23, 2016

(Tuesday Pre-Market) Stocks pivoted around unchanged early Tuesday as investors eyed several earnings reports and other key data that could give the market better insight into how U.S. consumers feel about the ecoomy.

Tuesday is front-loaded, with consumer confidence data for February and existing home sales both due at 10 a.m. ET. Before that, at 9 a.m. ET, comes the December Case-Shiller Home Price Index. Some market watchers believe the consumer confidence data could provide insight into whether the recent turbulence on Wall Street is affecting U.S. consumers. Analysts expect a 97.3 reading, down from January’s 98.1 reading, according to Reuters.

If the stock market is upsetting consumers, it wasn’t apparent in Home Depot (HD) earnings, which came out early Tuesday stronger than expected. Home Depot surprised to the upside, reporting better than expected sales and earnings, and its stock rose early in the day.

Stock markets fell overseas early Tuesday, but losses were relatively light compared to the gyrations seen earlier this year in equities. Traders kept oil as their focus, and oil prices were trading just a little lower after their recent strong rally. Monday’s stock rally was based in part on expectations for lower U.S. oil production, which could underpin sagging oil prices.

FIGURE 1: APPROACHING 1950

The S&P 500 (SPX), plotted here through Monday on TD Ameritrade’s thinkorswim platform, posted a strong rally Monday and is approaching the psychologically significant 1950 area. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Retail Names Report Today: Home Depot (HD) and Macy’s (M) reported their earnings results before Tuesday’s open, giving a fresh look into consumer spending after weak reports recently from Wal-Mart (WMT) and Nordstrom (JWN). Sales for both Home Depot and Macy’s topped expectations. But that’s not all – there’s more! Lowe’s (LOW) and Target (TGT) issue their figures pre-open on Wednesday. The Gap (GPS) reports after the market close on Thursday. JC Penney (JCP) issues its quarterly snapshot before the market open on Friday. With all these retailers sharing their data, investors might have a much better sense on whether the recent stronger wage growth and lower gasoline prices have translated into more trips to the mall, or whether recent stock market turbulence has weighed on consumer confidence.

Volatility Flagging: The CBOE Volatility Index (VIX), the benchmark on market volatility, fell below 20 on Monday to its lowest reading since the end of last year. This move reflected talk in the market about the possibility of oil beginning to stabilize, and may also be in reaction to stronger equities markets in Asia, which posted four-week highs early this week. Still, the VIX remains well above last summer’s lows of below 12.

Aerospace Merger Ahead? Shares of aerospace company United Technologies (UTX) soared Monday on reports of possible merger talks with Honeywell (HON). Combined, the two companies would boast sales of more than $90 billion. Shares of Honeywell also rose on the reports. However, some market watchers expressed doubt about whether such a merger would be allowed under anti-trust laws.

Good Trading,
JJ
@TDAJJKinahan

FIGURE 2: ECONOMIC AGENDA

This week's U.S. economic report calendar. Source: Briefing.com

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