MARKET SNAPSHOT: U.S. Housing Data, Spain In Spotlight Next Week

By Myra P. Saefong, MarketWatch

SAN FRANCISCO (MarketWatch) -- U.S. investors will be looking for a possible bailout request from Spain and U.S. housing data to set the trading tone in the coming week, as they watch out for any corporate guidance ahead of the so-called quarterly earnings season in mid-October.

The market will also get updates on GDP and consumer sentiment, as well as quarterly earnings results from home-builder Lennar Corp. (>> Lennar Corporation) and footwear and apparel retailer Nike Inc. (>> NIKE, Inc.)

"Many investors and traders are wondering if the market has enough catalysts to push higher, or if we have run our course," said Robert Fuest, head of investment research at Landor & Fuest Capital Managers.

Among potential euro-zone developments, investors will keep an eye on Spain as speculation grows over whether the country may be setting the stage for a bailout request.

Spain may formally ask the European Central Bank for assistance within the next couple of weeks, "and that much-needed request already has been baked into the current [European Union] bourses, as well as a major contributor to Spain's dip in bond yields," said David Brown, chief market strategist at Sabrient Systems.

"However, should there be a bump in the road between Madrid and the ECB, markets on both sides of the Atlantic would be spooked," he added. "The same holds true for the ECB. If [ECB Chief Mario] Draghi is unable to implement his proposed bond-purchase program, the markets will respond in a sharply negative fashion."

Fed drive

Following a Federal Reserve-inspired rally earlier this month that lifted benchmark stock indexes to multiyear highs, equities ended little changed for the week.

"The equity markets are torn between the very powerful force of the Fed's 'QEnifinty' program, which is going to create new money at a minimum rate of $40 billion per month, and the rapidly decelerating world's industrial economies," said Robert Barone, a portfolio manager and partner at Universal Value Advisors in Reno, Nev.

"After more than three years of money creation programs and 0% interest rates, the world's economies continue to sputter," he commented. "The new QE programs are simply more of the same, largely ineffective medicine. Eventually, the markets will figure that out, and having shot its last bullet, even the Fed won't be able to keep this equity market rally alive."

Mostly housing data, Apple Inc.'s (>> Apple Inc.) iPhone 5 release and big moves in oil grabbed the spotlight in the past week. The Dow Jones Industrial Average (DJI) and Nasdaq Composite Index (RIXF) each lost 0.1% from a week earlier, while the S&P 500 Index (SPX) lost 0.4%.

In the week ahead, "a potentially strong catalyst may just be consumer confidence" data due out Tuesday, said Fuest of Landor & Fuest. "If we can show a decent uptick in this figure, it can push the market forward as this will indicate good things for housing and jobless claims."

Also ahead, the market will see the latest on the Case-Shiller home-price index Tuesday, followed by new homes sales data Wednesday.

Pending home sales, durable-goods orders and second-quarter figures on GDP are on tap for Thursday, while Friday will see consumer spending, Chicago PMI and consumer sentiment.

"The fact that the Fed implemented QE3 would indicate that GDP will come in at best 1.7%, or a tad lower," said Sabrient's Brown. "But the improvement in housing could be enough to boost it to maybe 1.9%."

This past week saw a slew of housing data, with home-builder optimism hitting a six-year high in September and advances in housing starts and sales of existing homes in August.

Earnings watch

With the earnings season set to begin in a few weeks, traders will also be on the lookout for corporate guidance, as a few big names report results.

Among notable companies slated to report results next week are Lennar Corp. and Red Hat Inc. (>> Red Hat, Inc.) on Monday; Carnival Corp. (>> Carnival Corporation) Tuesday; Nike Inc., Micron Technology Inc. (>> Micron Technology, Inc.) and Discover Financial Services (>> Discover Financial Services) on Thursday; and Walgreen Co. (>> Walgreen Company) Friday.

Lennar, due to announce before the bell Monday, is projected to report a third-quarter profit of 28 cents a share, on revenue of $1 billion, according to a mean estimate of analysts polled by FactSet.

Nike, with results set for release after the market closes Thursday, is forecast to earn $1.12 a share on revenue of $6.4 billion for its fiscal first quarter. The company recently announced plans to buy back $8 billion of its Class B common stock.

Of the eight companies that have reported earnings to date for the third quarter, 50% have reported earnings above the mean estimate and 50% have reported sales above the mean estimate, according to John Butters, senior earnings analyst at FactSet.

The estimated earnings-growth rate for the S&P 500 for the third quarter is -2.7%, up slightly from a week earlier, but well below the 1.9% estimate seen at the start of the quarter, Butters said.

Also on the docket next week, scheduled Federal Reserve speeches include San Francisco Fed President John Williams on Monday and Philadelphia Fed President Charles Plosser on Tuesday, with both speaking about the economic outlook. Chicago Fed President Charles Evans will offer views Wednesday on current economic issues.

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