Home > Economics Week Ahead > US Economics Week Ahead: Is There Time for Turkey?

US Economics Week Ahead: Is There Time for Turkey?

November 21st, 2009 Michael McDonough

The market will be providing a cornucopia of data this week centered on Tuesday and Wednesday, which you can mull over as you begin brining your turkeys—as an aside here’s the recipe I will be following this year.  Also, I wrote an interesting column on Friday for Real Money titled ‘Talking Turkey on Agricultural Trends’ that I recommend you read.

The market will digest 15 important data releases in just three days.  But here’s what you should be paying attention to; the week’s most critical data will likely come in the form of the FOMC minutes, home sales, personal income and outlays, and the first revision of third quarter GDP, which likely won’t look as rosy as the advanced estimate.  On the housing front we will get the FHFA and Case Shiller Home Price Indices.  The MBA mortgage application index has also been garnering more attention as purchase applications continue to plummet to 12 year lows.  Looking toward the consumer, both the Conference Board’s and University of Michigan’s consumer sentiment indices are schedule for release.  Finally, I should mention that on Wednesday we will be getting October’s durable goods data.

Despite the shortened week we will be hearing earnings from the final Dow Jones Industrial component, HP.  In addition to HP, we can expect earnings from Medtronic, Barnes and Nobles, Borders, and John Deere.  This week the Treasury will be auctioning off a record $118 billion in two-, five- and seven-year Treasury instruments, which could place some pressure on bond markets.  However, so far demand for bonds, despite record issuances has remained in place, partially on the back of higher foreign demand.

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

Monday, Nov. 23

8:30 a.m. EST: October’s Chicago Fed National Activity Index (Risk: Neutral, Market Reaction: Marginal): The CFNAI is an index consisting of 85 separate data sets designed to encompass national economic activity and inflationary pressure. A reading of 0 indicates the economy is growing at the historical trend while a negative or positive result indicates the economy is growing below or above its historical average, respectively. Given the volatile nature of this index, the three-month moving average is typically quoted. This index remains somewhat obscure in the mainstream media and is likely to have a minimal impact on trading. This index has shown improvements over the preceding eight months but is expected to decline slightly in October from its reading of -0.81 in September.

10:00 a.m. EST: October’s Existing Home Sales (Risk: Neutral, Market Reaction: Significant): Existing home sales could gain some upward momentum in October following a sharp rise in September’s pending home sales index, which rose 6.1%–this index has been up for eight consecutive months.  The current Bloomberg consensus forecast is for existing home sales of 5.70 million 5.57 million a month prior.

Tuesday, Nov. 24

7:45 a.m. EST: 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 decline of -0.1% in store sales compared to a decline of -0.1% a week prior.

8:30 a.m. EST: First Revision of 3Q09 GDP (Risk: Neutral, Market Reaction: Significant): It is likely that the BEA’s advanced 3Q09 GDP estimate of 3.5% will be revised down significantly due to a higher than anticipated trade deficit, lower non-residential investment, slower than expected inventory rebuilding, and a small markdown due to worse than anticipated personal consumption data.   The current Bloomberg consensus forecast is for the 3Q09 first revision GDP growth to come in at 2.8%.  This revision, especially if below the market consensus, could cause some market participants to start questioning the overall strength of the US economic recovery, however, the 4Q09 growth pace is still on pace to finish around 3.5%.  Looking ahead, stronger than anticipated inventory liquidations during the quarter will likely be made up during 4Q09 and the first part of 2010 helping buoy growth.  Looking further into 2010, growth should remain stable, but below trend.

8:30 a.m. EST: Third Quarter 2009 Corporate Profits (Risk: Neutral, Market Reaction: Marginal): The importance of this release is somewhat muted given its timing toward the end of the 3Q09 earnings season.  However, since these profits tie into GDP growth they do not always move lock step with individual corporations’ aggregate earnings data.  In 2Q09 corporate profits reportedly grew around 5.7%.

8:55 a.m. EST: 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 2.0% last week on a year over year basis.

9:00 a.m. EST: September’s S&P Case Shiller Home Price Index (Risk: Neutral, Market Reaction: Moderate): The S&P Case Shiller HPI has demonstrated four consecutive months of gains, during which it gained 5%.  However, on a yearly basis both the 10 and 20 city indices are still down roughly 11%.  Nevertheless, according to August’s data 19 of 20 cities reported improvements on their year over year declines.  We can expect to see some continued improvement in September.

10:00 a.m. EST: November’s Consumer Confidence (Risk: Neutral, Market Reaction: Marginal): The Conference Board’s measure of consumer confidence should remain relatively steady after plunging to 47.7 from 53.4 in October.  Last month’s sharp decline was mostly due to concerns over the labor market.  The Bloomberg consensus forecast for November’s release is a marginal decline to 47.0, but I should mention that individual forecasts range from a low of 44.0 to a high of 47.0

10:00 a.m. EST: Third Quarter 2009 and September’s Monthly FHFA Home Price Index (Risk: Neutral, Market Reaction: Marginal): The Federal Housing Finance Agency (FHFA) monthly/quarterly 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. According to the FHFA’s second quarter report housing prices fell 0.7%on a quarter over a quarter basis, or 6.1% on a yearly basis.  The FHFA’s monthly price index fell for the first time since April in August by -0.3%, but should turn positive again in September. 

10:00 a.m. EST: November’s Richmond Fed Manufacturing Index (Risk: Neutral, Market Reaction: Marginal): The Richmond Fed manufacturing activity index has been in positive territory since May, but showed some signs of weakness in October falling from 14 to 7.   The new orders index, which tends to be a forward looking component, has fallen for three straight months this could potentially place some additional downward pressure on the headline index.  Aggregate changes in the Fed district’s manufacturing surveys could be a good indicator not only for the country’s economic health, but also ISM performance.

10:00 a.m. EST: State Street Investor Confidence Index (Risk: Neutral, Market Reaction: Marginal): The State Street Investor’s Confidence Index measures investors’ tolerance to risk. According to the State Street report, “[Last] month’s, institutional investors have paused to take stock,” commented Froot. “The Global Index reading of 108.4 remains comfortably above the neutral level of 100 for a seventh consecutive month, but underlying flows have been tempered somewhat from the very strong levels of July and August. While the US earnings season has been relatively robust so far, the number of positive surprises that have been observed in employment, retail sales, manufacturing and trade figures has diminished considerably, and this may be influencing investor risk appetite.”

2:00 p.m. EST: FOMC Minutes (Risk: Neutral, Market Reaction: Marginal): Despite only modest changes in the FOMC’s statement, analysts will likely be looking very closely at the motivation behind these nuances.  In any case, it is unlikely these minutes will provide any groundbreaking new information for market participants.

Wednesday, Nov. 25

7:00 a.m. EST: MBA Mortgage 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.  Applications fell 2.5% last week after gaining 3.2% a week prior.  Unlike the week prior which saw a precipitous drop in purchase applications while refinance applications remained positive; last week’s data was negative all around, despite lower interest rates.  Refinance applications dropped 1.4%, while purchase applications fell and additional which 4.7%.  A wave of buyers, filling out multiple mortgage applications, that were looking to take advantage of the first time home buyer tax credit–originally set to expire on Nov. 30th–have already completed their transactions, thereby reducing the current demand for mortgages.    However, the recent extension of the first time home buyer tax credit should eventually bring a new set of buyers into the market, which could help support the purchase index over the coming months–don’t forget buying a house can be a long drawn out process.   Nevertheless, increased lending standards for FHA loans, due to the organizations worsening finances, could place some headwinds on the purchase index’s recovery.

8:30 a.m. EST: October’s Durable Goods Orders (Risk: Neutral, Market Reaction: Significant): Durable goods should experience a modest increase in October after gaining 1.4% in September on the back of relatively strong machinery and transportation equipment orders.  Weakness in October for civilian aircraft orders should place some pressure on index, with the current Bloomberg consensus forecast expecting a rise of only 0.5%.  It will also be important to keep an eye on the less volatile ex-transport index.

8:30 a.m. EST: October’s Personal Income & Outlays (Risk: Neutral, Market Reaction: Significant): An increment in auto purchases—after dropping sharply upon the expiration of the ‘Cash for Clunkers’ program–should help bolster consumer spending, which fell -0.5% in September.  This release will be important because it will be the first look into the consumer’s fourth quarter spending habits leading into the holiday season.  Personal income is expected to show a modest gain for the month, but still remain down around -2% on a year over year basis.  The current Bloomberg consensus forecast is for an increment in spending of 0.5%, and an increase in income of 0.2%.  At the same time, analysts are anticipating a modest jump in Core PCE of 0.2% after rising 0.1% in September.

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims remain unchanged last week at 505K, after falling 12K a week prior. I should note there is again the potential for initial jobless claims slip below the psychological barrier of 500K this week, which could have the potential of at least temporarily influence trading.  Nevertheless, despite second derivative improvements these levels still indicate continued losses for monthly payrolls—albeit at a slower pace—coupled further deterioration to the unemployment rate, which has already exceeded 10%. The current Bloomberg consensus forecast is expecting claims to come in at 504K, essentially unchanged from last week.

9:55 a.m. EST: November’s Final Consumer Sentiment (Risk: Neutral, Market Reaction: Significant): After a disappointing preliminary November release of 66.0, consumer sentiment will likely finish the month up only marginally to what the Bloomberg consensus forecast anticipates will be a level of 67.0.  Like the Conference Board’s measure a weakening job market—albeit at a slower pace—continues to weigh on consumer attitudes.  Also interesting to note is the fact that in every month since June final number has finished higher than the preliminary release.

10:00 a.m. EST: October’s New Home Sales (Risk: Neutral, Market Reaction: Significant): Like existing home sales, new home sales should continue to climb in October, but at a more modest pace.  The primary reason behind this is likely the fact that existing home sales can be bought at a more attractive price compared to their new home counterparts.  The current Bloomberg consensus forecast is for the rate of new home sales to increase to 410K from 402K a month prior.

10:30 a.m. EST: 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 decline of -0.9 million barrels versus a gain of 1.8 million barrels a week prior.

12:00 p.m. EST: 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.

Thursday, Nov. 26

Thanksgiving Markets Closed

Friday, Nov. 27

Black Friday

4:30 p.m. EST: 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 ballooned last week to US$2.192trn from US$2.117trn a week prior on the back of higher agency and mortgage-backed securities holdings.    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.

Enjoy the weekend!

Comments are closed.