Stocks have made steady gains this summer despite a number of worrying signs reaching close to prior highs. This overall trend is likely to remain in place this week as well, though we lack in positive catalysts given the thin economic calendar and volumes are expected to remain on the low side due to seasonal factors.
The key economic report this week will be the Wednesday release of the minutes of the Fed’s last meeting, though we also get housing (Existing & New Home sales) and Durable Goods readings this week. Minutes of the July 31/August 1st meeting may not be as informative since the tone of economic data following that meeting, particularly with respect to Retail Sales and Industrial Production, has decidedly been on the positive side.
Given this recent data flow, Bernanke’s speech to the Fed’s annual Jackson Hole huddle later this month will likely be better reflective of his current thinking than discussions in the last FOMC meeting. In any case, we will get the August non-farm payroll numbers ahead of the Fed’s September 12th meeting. But the odds of more Fed easing will come down even more should the second-half economic outlook continue to improve.
In corporate news, we got weaker than expected results and guidance from Lowe’s (LOW) as the second largest home improvement retailer continued to lose ground to Home Depot (HD) which came out with positive results and guidance a few days back. We also have a major M&A deal in the health insurance space, with Aetna (AET) paying up a 20% premium for Coventry Healthcare (CVH) to increase its Medicare/Medicaid exposure. This follows similar acquisitions from WellPoint (WLP) and Cigna (CI) earlier this year aimed at bulking up their government healthcare exposure.
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