The silver lining to the recent run of soft economic readings is the Fed angle, with the central bank expected to hold off rate increases in the face of an uncertain economic backdrop. This has helped reverse the U.S. dollar’s strong earlier gains against the Euro, with the Euro’s value also benefiting from stronger recent data in the region that pushed German bond yields higher. As a result, the Euro is now at its highest level relative to the dollar since mid-March
Coming up on the data front are the April Industrial Production numbers coming out a little later and a bunch of housing related surveys next week. We will have Fed-centric data points next week, with the minutes of the last FOMC meeting coming out on Wednesday and the April CPI numbers arriving a week from today. One could reasonably expect the recent softening trend in the U.S. dollar to remain in place should U.S. data continue to remain on the soft to mixed side. This is a net positive for the large-cap S&P 500 companies who struggled in the Q1 earnings season as a result of the dollar strength.
On the earnings front, the Retail sector is the only remaining point of interest for this earnings season, with the sector as the only one that has any meaningful number of reports still awaited; earnings season has ended for 10 of the 16 Zacks sectors in the S&P 500 index. Next week is the last major reporting week of the Q1 earnings season, with all the major retailers like Wal-Mart (WMT), Target (TGT), Home Depot (HD) and others coming out with results. By the end of next week, we will have seen Q1 results from 97% S&P 500 members.
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