PowerTrend Brief: Company Warnings and Fed Easing Set Tone Ahead

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.

The last five days have made for an interesting week. Tuesday marked the 11th anniversary of the terrorist attacks on Sept. 11, a day of shock, horror, sacrifice and sorrow. Sept. 11 is a day that we Americans always should remember, no matter what the producers at NBC and The Today Show might think. Wednesday marked the unveiling of the much-anticipated Apple iPhone 5, the latest and arguably the company’s greatest smartphone.

Also on Wednesday, Federal Reserve Chairman Ben Bernanke and the rest of the Fed’s policy making body, the Federal Open Market Committee, kicked off their Sept. 12-13 policy meeting. Heading into the meeting, Wall Street expectations that the Fed will enact another round of easing were running high, according to a poll of 58 money managers, strategists and economists by CNBC. After last week’s disappointing August Employment Report released by the Bureau of Labor Statistics, nine in 10 of those CNBC survey participants said they expected the Fed to launch another stimulative bond-buying program in the next 12 months. That was up significantly from 78% at the end of June and 58% in early June.

As expected, on Thursday the Fed announced another round of easing.

But as we have learned during the last few years, just because there are stimulative efforts does not mean economic growth will accelerate on a sustained basis. CNBC’s survey results indicate that even though 90% expected the Fed to ease further, nearly six in 10 of the respondents doubt that effort will lower the unemployment rate near term. The U.S. employment rate has been more than 8% for 42 consecutive months, as of August 2012.

Exclusive  Market Holds up Against More Hawkish ‘Fedspeak’

There are several reasons further stimulus will do little to bring down the unemployment rate near term including uncertainty over the presidential election and what that may or may not mean for taxes, healthcare and more. Another is the increasingly talked about fiscal crisis. Just this past week, House of Representatives Speaker John Boehner voiced concern that a divided Washington may be unable to avoid the looming “fiscal cliff.” As a revised forecast from the Congressional Budget Office (CBO) points out, if not dealt with, the $560 billion mix of spending cuts and tax hikes that make up the U.S. government’s year-end fiscal cliff will “probably” cause a recession in 2013.

Neither the stock market nor companies, big or small, like uncertainty. If the CBO’s math is correct and the risk of a recession is increasing, it’s safe to say that uncertainty is on the rise. The saying, “when in doubt, leave it out,” comes to mind, except that in this case what’s being left out likely will be corporate spending and hiring.

In the last few weeks, we’ve heard several companies pre-announce weaker than expected results. In early September, FedEx (FDX), which reports its August quarter results on Tuesday (Sept. 18), cut its earnings per share guidance range for the quarter to $1.37—$1.43, from the earlier indicated $1.45—$1.60. FedEx was not alone. Last week, Spirit Airlines (SAVE), Werner Enterprises (WERN), Globecomm (GCOM), filtration products maker Polypore International (PPO), farm equipment retailer Titan Machinery (TITN), AK Steel (AKS), United Natural Foods (UNFI) and Data storage provider Xyratex (XRTX) cut their outlooks due to weak demand, rising costs or both. With less than two weeks to go until companies close their books on the current quarter, which means just over three weeks or so until corporate earnings season kicks off once again, investors will be bracing for more companies to pre-announce 3Q 2012 shortfalls.



Chris Versace
Editor, PowerTrend Brief

The Week Ahead

Exclusive  Five Big Oil Stocks to Buy As OPEC+ Nations Cut Supply

The week ahead starts off relatively quiet but comes to a head on Thursday, when a number of economic and corporate earnings reports hit the tape. Prior to that, we’ll get the latest snapshot on the housing market on Tuesday and Wednesday. Also this week, we’ll get the latest reading on economic activity in China and the euro zone, as well as regional manufacturing readings here in the United States.

Here’s a more granular look at what’s on tap this week:

Monday, Sept. 17
NY Empire Manufacturing Index (August)
LDK Solar Co. (LDK)

Tuesday, Sept. 18
NAHB Housing Market Index (September)
FedEx Corp. (FDC)
Schiff Nutrition International (SHF)

Wednesday, Sept. 19
Housing Starts (August)
Building Permits (August)
Existing Home Sales (August)
MBA Mortgage Index (Weekly)
Adobe Systems (ADBE)
Autozone Inc. (AZO)
Bed Bath & Beyond Inc. (BBBY)
General Mills Inc. (GIS)

Thursday, Sept. 20
Bloomberg Consumer Comfort Index (Weekly)
HSBC Flash China Manufacturing PMI (September)
Initial and Continuing Jobless Claims (Weekly)
Leading Indicators (August)
Markit Economics Flash Eurozone PMI (September)
Philadelphia Fed Index (September)
ConAgra Foods, Inc. (CAG)
IHS Inc. (IHS)
Jefferies Group Inc. (JEF)
CarMax Inc. (KMX)
Herman Miller Inc. (MLHR)
Oracle Corp. (ORCL)
Rite Aid Corp. (RAD)
Scholastic Corp. (SCHL)
TIBCO Software (TIBX)

Friday, Sept. 21
Darden Restaurants (DRI)
KB Home (KBH)

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader


Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor