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US Economics Week Ahead: Quiet for the Holidays

December 24th, 2009 Michael McDonough

The last week of 2009 bears some good news for investors, and that is there isn’t much of it.  The week ahead could very well be the quietest week of 2009.  However, not all is still, there are several quasi-important releases related to housing, consumer confidence, and manufacturing.  Data-centric investors will be analyzing the Dallas and Kansas City fed’s manufacturing reports along with the Chicago PMI for clues toward December’s ISM reading.  The week’s most lauded release should be December’s consumer confidence report on Tuesday.  Confidence should see a nice jump on what is generally perceived as an ongoing economic recovery.  Jobless claims could face some pressure this week on the back of inclement weather in the northeast, which has the potential to reduce employment in weather sensitive industries.  The treasury will be auctioning $118bn in notes during the week tying the record (set last month); the results of this auction could have some impact on markets.  Also, be on the lookout for after Christmas sales by retailers looking to bolster sales and attract customers who received store gift cards in their stocking.  In any case, enjoy the quiet week and have a great holiday!

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

Monday, Dec. 28

10:30 a.m. EST: December’s Dallas Fed’s Texas Manufacturing Outlook (Risk: Neutral, Market Reaction: Marginal): This index is not highly publicized, but tracks manufacturing activity within the Dallas Feds jurisdiction.  Last month’s survey suggested, “Texas factory activity showed its first signs of growth in more than a year, according to business executives responding to November’s Texas Manufacturing Outlook Survey. The production index, a key indicator of state manufacturing conditions, turned positive for the first time since July 2008. Other key indexes of current factory activity—including capacity utilization, shipments, new orders and growth rate of orders—also moved into positive territory.

4:30 p.m. EST: Fed Balance Sheet & Money Supply—Prior Week’s Release (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 jumped last week to US$2.218trn from US$2.169trn, due increased purchases of agency MBS.    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.

Tuesday, Dec. 29

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 rose +0.6% compared to a drop of +0.4% a week prior.

8:55 a.m. EST: Redbook (Risk: Neutral, 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 rose 1.9% last week on a yearly basis.

9:00 a.m. EST: October’s S&P Case-Shiller Home Price Index (Risk: Neutral, Market Reaction: Moderate): With the FHFA House Price Index moving higher in October after posting two weaker months, and  the Case-Shiller’s general upward trend over the prior five months—rising 3.1% during the third quarter—we should see another gain in October.

10:00 a.m. EST: December’s Consumer Confidence (Risk: Neutral, Market Reaction: Significant): An increment in the Reuters/University of Michigan consumer sentiment index to 72.5 from 67.4 in December should bode well for consumer confidence.  An improvement in confidence would be in-line with what is generally perceived as an economic recovery.   The current Bloomberg consensus forecast is for a reading of 47.5 compared to November’s reading of 53.0.

10:00 a.m. EST: December’s 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, “Across all regions, institutional investors are largely treading water; neither increasing nor reducing their aggregate holdings of risky assets,” commented Froot. “However, the aggregate figures mask some country- and region-specific views. This month, for example, institutional investors aggressively pared their holdings in selected markets, such as Australia, while continuing to add to their emerging markets holdings. Overall, investors are displaying some caution about the current level of equity valuations, and a desire to see more evidence of real economic activity and aggregate demand, particularly in the US, before adding to equity exposures.”

Wednesday, Dec. 30

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 10.7% last week after rising 0.3% a week prior.  Refinance applications fell 10.1%, while purchase applications dropped -11.6%.  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, and have recently reduced the 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.

9:45 a.m. EST: Chicago PMI (Risk: Neutral, Market Reaction: Moderate): The Chicago PMI measures business activity in the mid-West, and is released one business day prior to the ISM. *I should note that the Chicago PMI is released several minutes early to subscribers, so the market could begin reacting to the data as early as 9:42 a.m.  This index is considered a forward looking indicator to the national ISM, so any large unexpected shifts in the Chicago PMI could impact trading.  The current Bloomberg consensus forecast is for a reading of 54.9, versus to 56.1 in November.  The PMI covers both the manufacturing and non-manufacturing sectors.

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 an unexpected decline of -4.9 million barrels versus a drop of -3.7 million barrels a week prior.

3:00 p.m. EST: Farm Prices (Risk: Neutral, Market Reaction: Marginal): Given the relationship between farms prices and food prices, this index could have significant implications on future headline CPI.

Thursday, Dec. 31

8:30 a.m. EST: Jobless Claims (Risk: Neutral, Market Reaction: Significant): Initial claims fell 28K last week to 452K, after rising 17K a week prior.  The four week moving average improved to 465,250 from 467,500.  Improving initial jobless claims are indicative of fewer job losses in the BLS’s monthly employment report; however, the job situation will still get worse before it gets better.  Last week’s inclement weather could place some pressure on this week’s claims data.

10:30 a.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.

11:00 a.m. EST: December’s Kansas City Fed Manufacturing Survey (Risk: Neutral, Market Reaction: Marginal): Data-centric investors will be looking at the Kansas City Fed’s mostly overlooked manufacturing survey for clues toward December’s ISM release.  Specifically, these investors will be watching the surveys new orders and shipments components.

4:30 p.m. EST: Fed Balance Sheet & Money Supply—Current Week’s Release (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 jumped last week to US$2.218trn from US$2.169trn, due increased purchases of agency MBS.    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, Jan. 1

All Markets Closed—New Year’s Day!

Enjoy the weekend!

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  1. December 26th, 2009 at 06:23 | #1

    Happy to know this. home buyer tax credit should eventually bring a new set of buyers into the market.

  2. December 26th, 2009 at 18:39 | #2

    I want to quote your post in my blog. It can?
    And you et an account on Twitter?

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