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Five Things You Need to Know for Monday


What you need to know (and what it means).


Five things you need to know to stay ahead of the pack on Wall Street.

1. Data in the Hizzouse

Sorry, we got carried away there for a moment in a fit of late 90s exuberance. No one has used a word like "hizzouse" in more than seven years now - at least not anyone "cool". Wait, where were we? Oh yeah, the key data this week is all "up in the house," so to speak. Prepare to hear from the Office of Federal Housing Enterprise Oversight, also new and existing-home sales from the Commerce Department.

  • Today we get Commerce Department report on new-home sales (10 a.m. EST).
  • Economists polled by Dow Jones Newswires and CNBC estimate sales bumped up slightly in January, to an annualized 1,270,000 from December's 1,231,000.
  • Warmer weather causing the bump? It could well be less weather related and more "deal sweetener related."
  • Tuesday, existing-home sales (10 a.m. EST), expected to rise to a 6.64 million seasonally adjusted annual rate from 6.60 million in December
  • OFHEO's home price index will be released on Wednesday at 10 a.m.
  • The index tracks sales of the same houses over time to gauge price appreciation, making it potentially more useful than other price gauges that compare sales prices of different homes.
  • By the way, have you seen yet? Here's our Zillow zestimate.

2. Acne vs. Dandruff

Nothing a bottle of Head & Shoulders and a course of Tetracycline can't fix, right? Actually, no. First the Dandruff:

  • Technicians are closely watching a near textbook head and shoulders pattern potentially forming on the Nasdaq-100 (NDX).

What about the acne? The S&P 500 has everyone watching the 1300 level for potential "acne," or, as normal people refer to it, a "breakout." Also, the Russell 2000 will break out at just above 738.

Some additional things to keep in mind:

  • It is not necessary for the entire stock market to go up at the same time.
  • Market watchers have been saying for at least a year now that the cycle of small and mid-cap outperformance is due to conclude.
  • The Russell 2000 and the S&P Equal-Weight Index were up 33.4% and 44.8%, respectively between January 2000 and January 2006, compared to -15% and -60% for the S&P 500 and Nasdaq-100.

3. The Fed Never Sleeps

Their eyes may be closed, breathing and heart rates diminished, body temperatures sub-humanly cooler, but the Fed never sleeps. While you were out enjoying post happy hour happy hour on Friday, Fed Chairman Ben Bernanke was speaking at Princeton, discussing the "Benefits of Price Stability."

Bernanke says:

  • "Central bankers, economists, and other knowledgeable observers around the world agree that price stability both contributes importantly to the economy's growth and employment prospects in the longer term and moderates the variability of output and employment in the short to medium term."
  • "Price stability plays a dual role in modern central banking: It is both an end and a means of monetary policy."
  • This is a fancy way of introducing us to the Fed setting explicit "inflation targets."
  • There is a potential battle developing among Fed policy-makers over this. When former Fed Chairman Alan Greenspan uses the phrase "monetary policy flexibility" isn't he arguing against explicit inflation targeting?
  • Some economists argue that balancing what Bernanke says are the Fed's goals - financial stability, low inflation, full employment - is not a matter of a precise formula, making mechanical reliance on a specific inflation target difficult.

4. Never Leave Home Without Protection(ism)

French Prime Minister Dominique de Villepin's government has arranged for the merger of Suez and Gaz de France in a $37.98 billion deal, in an effort to fend off a hostile bid for Suez by Italy's Enel, notes the Wall Street Journal. Now why would they do that? Perhaps because there has been an increasing wave of cross-country takeovers in Europe. Oh, and then there's that little port deal here in the U.S. Did we say 6 ports? Sorry, we meant 21. Hey, Blackjack! Protectionism.

  • Politicians in Italy, Poland, Spain, France and Luxembourg have indicated they are mulling various ways to thwart corporate raiders as merger activity heats up across the continent.
  • On Friday, Spain said it would amend its energy law in line with EU norms after the EU executive threatened legal action if Spain invoked it to block German utility E.ON from taking over domestic rival Endesa.
  • Mittal Steel (MT) is crying "protectionism" over the difficulty encountered in acquiring Arcelor.
  • Anti-dumping rules here.
  • The "August 1914 Effect" here. For those among us who are "history challenged," that was the start of the the First World War. (Ok, we had to look it up).

5. It's Oscar Week! It's Oscar Week!

With the Olympics falling as flat as a three-legged dog in a bobsled (no idea what that means), Hollywood and the rest of our People-magazine-addicted nation turn their attention to the movie version of an olympic gold medal - the Oscars.


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