RETAIL SALES, CONSUMER INFLATION AND HOUSING IN FOCUS THIS WEEK

5/11/08 8:08 pm CT Sunday

By Dave Harris

First off, happy mothers day to all. Mixed same store sales and a reminder of the credit concerns resulted in some weakness in the major indexes last week. The S&P fell over 25 percent, the NAZ over 31 percent lower, and the Dow Jones Industrials lost nearly 2 and a half percent to end at 12,745.88. Some notable economic news is on tap for this week, which can sway stocks in one direction or another. This Tuesday, retail sales come out from the commerce department. A reading on consumer inflation, the CPI, is Wednesday. Friday, consumer sentiment from the University of Michigan and housing starts with building permits will be released.

Shipper Fed Ex (FDX) said higher energy prices will result in lower fourth quarter earnings. Don’t be fooled. When they officially report, they'll surprise to the upside.

I'm staying away from the insurers. American International Group (AIG) reported a big loss in the fourth quarter of over $7.8 billion. I think the stock has further to fall, so I would sell.

As for consumer strength, let's look at the same-store sales of late. Wal-Mart (WMT) was the bright spot, with a nice 3.2 percent same-store sales gain. Its competitor, Target (TGT) was a bit disappointing with only a 3.1 percent rise. However, as an investment I like Target here. The cycle is going to turn, and I would pick up Target while it’s cheap at only 15 times earnings. Wal-Mart sells at over 18. In this environment, I would avoid the higher-end specialty stores. Nordstrom (JWN) for example, said sales fell 3.8 percent and the Gap (GPS) had a whopping 6 percent decline. Kohl's (KSS) was alright, with a 3 and a half percent rise. They report earnings this Thursday.

This stock is red hot! Simon Property Group (SPG) the mall owner said funds from operations, or FFO, rose over 6 and a half percent from last year. All we've been hearing about is consumer weakness these days, yet SPG consistently performs. They have malls all over the country and overseas, with a nice blend of outlet centers. Currently the company is developing in China- a major plus. Although the stock has had a nice run-up since January, I would still buy it here. Nice yield here too at 3.6 percent! It closed down .85 cents at $99.53 Friday.

A few significant companies report earnings near the end of the week. Watch for the likes of Deere (DE) Wednesday and Hewlett-Packard (HPQ) Thursday.