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US Economics Week Ahead: Earnings Usurp Housing Data

Written by

MikeMcD82

On the economic front the market will be encountering some important housing related releases in addition to the Fed’s Beige Book on Wednesday.  On the housing front, on Monday the market will get a peak at October’s NAHB/Wells Fargo Housing Market Index, followed by housing starts on Tuesday.  However, the most important housing release of the week should be existing home sales for September, which is being reported on Friday.  This index unexpectedly declined last month, causing investors to question the sustainability of the retrenchment of the US housing market.  Nevertheless, the fact that the inventory of existing homes declined to a 2.5 year low was somewhat overlooked.  However, rising mortgage delinquencies and a weakening labor market continue to cast a shadow over a sustained recovery in the sector.  Other important indicators this week include housing starts and PPI on Tuesday, and jobless claims and September’s leading indicator index on Thursday.  The week will also see quite a bit of Fed speak, which could generate some headlines as investors look for clues on when the Fed may begin to remove begin removing support from the markets.

Nonetheless, the show this week will probably be stolen by a slew of earnings releases that include 3M, Apple, Caterpillar, Microsoft, McDonald’s, Pfizer, Coca-Cola, American Express, and DuPont—to name a few.  Also, Windows 7 is schedule for release on Thursday, which could lead to an increase in computer spending.

Here is the rest of this week’s US calendar:

Monday, Oct. 19

1:00 p.m. EDT: October’s Housing Market Index (Risk: Neutral, Market Reaction: Marginal): The NAHB/Wells Fargo Housing Market Index is unlikely to show much improvement this month as the US Congress continues debating over whether or not to extend or enlarge the first time home buyer tax credit.  Prior to October, the index has experienced three consecutive months of gains.  The current Bloomberg consensus forecast is for a reading of 20, compared to last month’s reading of 19. 

Tuesday, Oct. 20

7:45 a.m. EDT: ICSC-Goldman Store Sales (Risk: Neutral, Market Reaction: Marginal): This weekly index tracks aggregate store sales across major US retailers, accounting for roughly 10% of total retail sales.  Given recent data supporting an increasing US saving rates and a worsening employment situation, this index could face some downward pressure.  Last week’s number indicated a weekly increment of 0.6% in store sales compared to a gain of 0.3% a week prior.

8:30 a.m. EDT: September’s Housing Starts (Risk: Neutral, Market Reaction: Significant): According to the Bloomberg consensus forecast September’s housing starts are expected to increase to a seasonally adjusted annual rate of 0.615 million units compared to August’s level of 0.598 million units.  Housing starts have essentially moved sideways over the past several months.  But, given the large supply of homes already on the market this may not be entirely bad.  It will be important to monitor the level of new building permits in the release as it is forward looking to starts.

8:30 a.m. EDT: September’s Producer Price Index (Risk: Neutral, Market Reaction: Moderate): Lower energy prices for the month will likely bring down September’s producer price index down after gaining 1.7% in August.  The current Bloomberg consensus forecast is for a decline of -0.3%.  The core-PPI is expected to show a modest gain with a consensus forecast of +0.1%.

8:55 a.m. EDT: Redbook (Risk: Negative, Market Reaction: Marginal): The Redbook is a weekly measurement of chain stores, discounters, and department store sales.  This indicator tends to be less significant than the ICSC-Goldman Store Sales in forecasting retail sales.  According to the Redbook store sales were rose 0.6% last week on a year over year basis.

8:00 p.m. EDT: Charles Plosser, Philadelphia Federal Reserve Bank President, is giving a speech on monetary policy to the Stanford Institute for Economic Policy Research

Wednesday, Oct. 21

7:00 a.m. EDT: MBA Purchase Applications (Risk: Neutral, Market Reaction: Marginal): This index, which tracks new mortgage applications tends to be a reasonable forward looking indicator for home sales, but issues including customers filling out numerous applications could skew the index.  Last week’s data declined 1.8% after jumping 16.0% a week prior.  The refinance index fell 0.1%, while the purchase index fell 5%. Refinances made up 67.4% of all applications last week.

10:30 a.m. EDT: EIA Petroleum Status Report (Risk: Neutral, Market Reaction: Moderate): This report measures US domestic petroleum inventories.  Large unanticipated swings in this index could have a significant impact on energy prices.  Last week this report showed a rise of 0.4 million barrels versus a decline of -1.0 million barrels a week prior.

2:00 p.m. EDT: Beige Book (Risk: Neutral, Market Reaction: Moderate): Investors will be looking to see if any of the Fed’s districts begin reporting modest growth.  The Beige Book has been growing somewhat more optimistic with most of the Fed’s district reporting that declines were at least leveling off or stabilizing.

4:30 p.m. EDT: Eric Rosengren, Boston Federal Reserve Bank President, is opening the Boston Fed’s annual economic conference on re-evaluating regulatory and monetary policy.

Thursday, Oct. 22

8:30 a.m. EDT: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell last week by 10K to 514K, after falling 33K a week prior. Despite second derivative improvements these numbers still indicate further deterioration to upcoming payroll numbers, and the unemployment rate, which is very likely to exceed 10% in the coming months. The current Bloomberg consensus forecast is expecting a modest uptick for this week’s initial claims release to 519K from 514K.

10:00 a.m. EDT: FHFA House Price Index (Risk: Neutral, Market Reaction: Marginal): The Federal Housing Finance Agency (FHFA) monthly house price index is compiled by using loan data provided by Fannie Mae and Freddie Mac, which means all the data within the index consists of conventional mortgages within the limitations of the GSE’s.  The FHFA’s monthly purchase only index gained 0.3% in July with Junes +0.5% increment being revised down to 0.1%.  The monthly index tends to be relatively volatile, but should continue to trend up in-line with the Case-Shiller home price index.

10:00 a.m. EDT: September’s Leading Indicators (Risk: Neutral, Market Reaction: Moderate): The Conference Board’s Index of leading indicators should rise for the sixth consecutive month in September.  The current Bloomberg consensus forecast is expecting a +0.9% rise for the month, compared to a +0.6% increment in August.  The biggest positive contributions for the index will likely come from the yield curve, UMich expectations index, and jobless claims.

10:30 A.M. EDT: Eric Rosengren, Boston Federal Reserve Bank President, is presenting a paper on whether financial stability should be added to central banks objective.

10:30 a.m. EDT: EIA Natural Gas Report (Risk: Neutral, Market Reaction: Moderate): This report highlights domestic natural gas inventories, which could have a significant impact on the energy sector.

1:30 P.M. EDT: William Dudley, New York Federal Reserve Bank President, will be moderating a panel on monetary policy instruments and the Fed’s supervisory function.

4:30 p.m. EDT: Fed Balance Sheet & Money Supply (Risk: Neutral, Market Reaction: Marginal): Since the Fed’s shift to quantitative easing, the balance sheet has become one method to measure to the Fed’s effectiveness.  The market will pay close attention to the reserve bank credit component, which measures factors supplying   providing reserves into the banking system.  The Fed’s balance sheet again declined last week to US$2.174trn from US$2.120trn a week prior.  The main catalyst behind the rise was an increase in the holdings of Treasury and mortgage bonds.  The fed’s balance sheet has slowly been shifting away from emergency lending facilities to Treasuries, agency debt, and mortgage-backed securities to help moderate long-term interest rates.

Friday, Oct.23

8:30 a.m. EDT: Ben Bernanke, Federal Reserve Chairman, will give a speech on the supervisory landscape at the Boston Fed’s economic conference.

10:00 a.m. EDT: September Existing Home Sales (Risk: Neutral, Market Reaction: Significant): Strong pending home sales should help bolster existing home sales after last month’s surprising decline.   The current Bloomberg consensus forecast is projecting an increase to a seasonally adjusted annual rate of 5.35 million unites, compared to 5.10 million units a month prior.  Despite last month’s decline in home sales the inventory of existing homes dropped to 8.5 months from 9.3 months in July.  It may also be possible we could see a spike in this data as potential home buyers try to close deals before the current expiration of the first time home buyer tax credit on November 30th.

11:30 a.m. EDT: Donald Kohn, Federal Reserve Vice Chairman, will participate in a panel related to international perspectives at the Boston Fed’s economic conference.

Enjoy the weekend!

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