DELL Dell Inc. (MM)

Wednesday, August 22, 2012

Stocks have struggled this week to cross the year’s high set in April, though they did briefly move past that level intraday on Wednesday. Minutes of the last Fed meeting coming out this afternoon may not be enough to do the trick either as the central bank’s thinking has likely evolved since then. The bigger than expected Japanese trade deficit numbers may also give investors a pause as it brings the global growth worries front and center.

The Fed had a clear easing bias at the time of the July 31/August 1 FOMC meeting, but decided against taking any concrete action to get validation from economic data. The minutes of that meeting coming out this afternoon will give us more clarity on the extent of support within the FOMC for more quantitative easing at the time. But that support has likely softened since then given the relatively more robust economic data in the following days, particularly on the Retail Sales and Industrial Production fronts. As such, we will have to wait for Bernanke’s Jackson Hole speech later this month to get more clarity on the Fed’s latest thinking. But things will definitely be a lot clearer by the time the Fed meets again in mid-September as by then we will have the August non-farm payroll report in addition to a host of other key economic readings.

On the earnings front, we got a sup-par report from Dell (DELL) after the close on Tuesday, with competitive pressures and economic woes prompting the once-mighty PC maker to guide lower for the current quarter and rest of the year. Results from Hewlett-Packard (HPQ) coming out after the close today may not be much different as it too has been struggling for a while now. In other reports, Abercrombie & Fitch (ANF) came short of expectations again as the once-edgy retailer continues to lose ground to rivals.

Sheraz Mian
Director of Research

 
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