Market Perspective for September 19, 2016

Both the Bank of Japan (BoJ) and Federal Reserve are scheduled to meet on Wednesday. Negative interest rates have failed to spur on the world’s third-largest economy and Japanese policymakers believe that further easing is necessary, but they are uncertain of the precise way to accomplish that goal. Some argue for cutting interest rates further below zero, while others argue for buying more assets, but the BoJ is expected to do neither at this week’s meeting. While the odds of a near-term interest rate hike in the United States greatly diminished last week, investors will still be paying close attention to the Fed in order to gauge the probability of a December hike.

The U.S. housing market will also be in focus this week. On Monday, the September Home Builders’ Index, a gauge of sentiment in the industry, climbed to its highest level since October 2015 and before that the highest level since 2005. On Tuesday, housing starts and building permits for August will be out. The weekly mortgage purchase applications index will be released on Wednesday. Existing home sales for August are due on Thursday. Analysts expect housing starts will show a slight decline, but anticipate a small increase in existing home sales.

In addition to Wednesday’s weekly oil inventory data investors and traders are assessing the impact of a gasoline pipeline leak in the Southeast. Several states have declared a state of emergency as gasoline supplies run low. Prices in Georgia jumped more than 20 cents per gallon in four days, with Tennessee and Alabama prices rising nearly 10 cents a gallon. Weekly unemployment claims and Eurozone consumer confidence will be available on Thursday and flash Purchasing Manger Indexes (PMI) for various nations will be out on Friday.

In earnings news, investors will hear from Adobe Systems, FedEx and Bed, Bath & Beyond as well as AutoZone and Rite Aid. Adobe (ADBE) is expected to continue its strong run of earnings and sales growth when the company reports its third quarter results Tuesday after the bell. Investors are looking for the company to show strength in its cloud computing services operations. Analysts predict FedEx (FDX) will easily beat earnings and revenue estimates. Margins are forecast to improve despite volatility in the company’s fuel costs. Economists also follow Fed Ex’s earnings reports to identify shifts in the global economy.

Analysts expect houseware retailer Bed, Bath & Beyond (BBBY) will report lower sales and earnings figures after the bell Wednesday as the company continues to face strong headwinds. AutoZone (AZO) will report fourth quarter results on Thursday.  It too is facing headwinds, including tougher currency translations as the U.S. dollar rallies versus the Mexican peso. Analysts anticipate Rite Aid (RAD) will post slightly higher earnings and revenue figures compared to the same period a year ago.

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