Market Preview: Market Directionless With Bond Market Closed

Markets seesawed between positive and negative Monday without the U.S. bond market available to lend direction. Already pundits are calling for Fed Chief Powell’s head, as they fear rising rates will crush the decade long bull market. In a CNBC interview Monday, BlackRock CIO Rick Rieder, who oversees the management of $1.85 trillion in bonds, said he believes the Fed will back down and only raise one or two times next year. Many worry that by telegraphing its moves, the Fed has been set on autopilot and a course correction would be very difficult to implement. Market participants may prefer a little more uncertainty coupled with a more data driven approach headed into 2019. But, others point to the fact that the market moves thus far in reaction to rising rates has been a mere blip in this long-toothed bull market.

Tuesday investors will get earnings from AZZ Corp. (AZZ) and Helen of Troy (HELE). AZZ had a rough past year, as CEO Tom Ferguson put it on their last earnings call, “We are glad to have the year…behind us.” In addition to issues including large customer project cancellations, the company was forced to undertake a restatement of its financials which clearly took a toll on management. The company, which provides a variety of metal working and coating material services for the energy market, has performed relatively well in the circumstances. Investors will be looking for the company to hit the reset button, and will want to know exactly what that entails moving forward. Helen of Troy CEO Julien Mininberg proudly touted the company’s increased online sales, up 30%, last quarter. Shareholders were pleased with the efficient operation of the household and beauty goods provider, sending the stock up almost 15% after that earnings report. The stock has continued a good run, but has pulled back recently headed into Tuesday’s earnings.

The small business optimism index is expected to pull back very slightly from last month’s record high when it is announced Tuesday morning. The consensus is for the index to move from 108.8 to 108. Redbook retail numbers will also be released Tuesday morning. The weekly number may serve as a canary in a coal mine for analysts looking for interest rate impact on consumer pocketbooks as we head into Q4. Mortgage application numbers are expected to be flat when they are announced Wednesday. With new mortgages ticking up .1% but refis backtracking .1% the overall number is expected to remain unchanged. Investors will also have a chance to peruse the PPI and Atlanta Fed business inflation expectation data on Wednesday.

Fastenal (FAST), a bellwether of the industrial construction market, reports earnings Wednesday. Analysts will want to hear how management sees rising rates impacting business into next year. The nuts and bolts provider may have especially relevant insight into the industrial construction market at this juncture in the Fed story. Also reporting on Wednesday is VOXX International (VOXX). The automotive and consumer audio provider is down 38% in the past year. Last quarter CEO Pat Lavelle promised the second half of the year would see better earnings numbers, as well as a continuation of cost cutting. Investors looking for a rebound in the stock will be looking to Mr. Lavelle for the promised improvements.

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