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The Week Ahead: A Fine-Tooth Comb for Fed Minutes

Jason Stipp
Jeremy Glaser

Jason Stipp: I'm Jason Stipp for Morningstar. We're taking a look at the week ahead with Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for joining me.

Jeremy Glaser: You're welcome, Jason.

Stipp: You're expecting a fairly quiet summer week in the week ahead, but you will be looking for the Fed minutes on Wednesday.

Glaser: We thought that last week was going to be a quiet summer week as well, and we saw exactly how that turned out.

The Fed minutes on Wednesday are one of the big things that we'll be watching. People are going to be looking closely at this--word-by-word, line-by-line--for any hints if the Fed is going to raise rates in September or if they are going to hold off until a later meeting.

But overall we're not really going to learn that much from these minutes. We already know that the Fed probably wants to raise rates in September if the data cooperates with them. They are laying the groundwork for that, but it's not a done deal, and it could get pushed off.

The August employment data probably would be the single factor that could push it off. The last couple of years, August jobs data has looked very disappointing. If that were to repeat for this August, I think you could very well see the Fed deciding to wait to show that it is data-dependent.

But either way people are going to be looking very closely at this, even if we're probably not going to learn that much that we don't already know now.

Stipp: Also this week in the economic reports, we're going to get some hints on housing.

Glaser: We're going to get information on housing starts, building permits, and also existing home sales.

A lot of these metrics were very strong in June, particularly the permits and starts, and it's going to be interesting to see if that trend continues in July. There were some things in the June data, including the expiration of some tax credits in New York, that probably pulled some demand up and made the data a little bit stronger than it would be otherwise. But generally speaking, housing looks like it has been recovering, and we are looking for it, in the back half of 2015, to be one of the keys to recovery, as other parts of the economy like the manufacturing sector have looked weaker. This data will give us some idea of how that's progressing.

We'll also get earnings from Home Depot and Lowe's, and those can also be keys to how consumers are thinking about the housing market. If you're buying or selling a home, you are probably going to be making a lot of trips to the home improvement warehouses. That should show up in their results, and those earnings calls usually have some good commentary on the housing market--which regions are doing better, which regions are doing worse. That will offer another clue about what's happening in the housing sector.

Stipp: Lastly, this week we'll be hearing from Walmart, getting their earnings reports. That stock looks undervalued now. What should we be looking for in those results?

Glaser: Walmart is a bit under pressure as they have been making investments in their new e-commerce platform and in their labor force by paying higher wages. That has made some investors a little bit nervous about the prospects for the company.

But Ken Perkins, Morningstar's Walmart analyst, feels like a lot of these investments are going to pay off over the long term, even if there is some near-term pain there, and really there was a bit of an overreaction, and the shares are trading for a pretty reasonable discount to what he thinks they are worth.

As we look at their earnings report this week, we're probably going to see more of this some: continued investment, continued pressure on the top line as well. But if it is even more disappointing than the market expects, and there is a big sell-off, it could be an opportunity to pick up this wide-moat name at an even bigger discount.

Stipp: Jeremy, great points for our radar on the week ahead. Thanks for joining me.

Glaser: You're welcome, Jason.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.