The Week Ahead….
Market Focus: Once again focus will be on Lybia and Japan. Stocks rose and oil fell on the news of a cease fire. The cease fire never materialized so Monday should be very interesting. The upcoming week’s economic agenda is thin, with only a few notable reports like durable goods and initial jobless claims out later in the week. U.S. corporate earnings will once again be in focus for investors. Companies scheduled to report next week range from electronics retailer Best Buy to smartphone maker Research in Motion and software giant Oracle.
Existing Home Sales: Existing home sales tally the number of previously constructed homes, condominium and co-ops in which a sale closed during the month. Existing homes (also known as home resales) account for a larger share of the market than new homes and indicate housing market trends. The consensus estimate is for a drop from the robust 5.36 million units to 5.15 million units. Look for the median price and the supply. Last month the median price declined but so did the supply level to 7.6 months from the previous 8.2 months. Why Investors Care: This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets. Even though home resales don’t always create new output, once the home is sold, it generates many revenues.
ICSC Goldman Store Sales: This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers, is related to the general merchandise portion of retail sales. It accounts for roughly 10 percent of total retail sales. Why Investors Care: Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you’ll have a pretty good handle on where the economy is headed.
Redbook: A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index. Why Investors Care: The pattern in consumer spending is often the foremost influence on stock and bond markets.
FHFA House Price Index: The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Why Investors Care: Home values affect much in the economy — especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. Many economists believe that the U.S. economy and especially the depressed housing sector will not recover until home prices firm back up. This makes watching home prices all the more important for the investor.
Susan Pianalto President of Cleveland Federal Reserve Speaks.
New Home Sales: New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends. The Consensus Estimate is for a slight increase 284,000 units to 290,000 units. Look at the supply of units. Last month the supply level move from 7 months to 7.9. Keep in mind that 280,000 units is the latest historical low from October 2010. Why Investors Care: This provides a gauge of not only the demand for housing, but the economic momentum. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy. The economic “ripple effect” can be substantial especially when you think a hundred thousand new households around the country are doing this every month.
EIA Petroleum Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. The level of inventories helps determine prices for petroleum products. Why Investors Care: Petroleum product prices are determined by supply and demand – just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in crude oil prices – or price increases for a wide variety of petroleum products such as gasoline or heating oil.
Weekly Jobless Claims: New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. The consensus estimate is for a decrease from 397,000 to 385,000. Why Investors Care: Jobless claims are an easy way to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with an income that gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy.
Durable Goods Orders: Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month’s data. The Consensus Estimate is for a significant drop from January’s 2.7% rise to 1.5%. Why Investors Care: Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and therefore a major influence on their investments. Orders for durable goods show how busy factories will be in the months to come, as manufacturers work to fill those orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduce the prospects for inflation.
3 Month, 6 Month, 2yr., 5yr., 7yr. bill announcements.
Fed Balance Sheet
GDP: Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The Consensus Estimate is for a 3.1% rise from the fourth quarter of 2010. The price component is expected to remain the same at, 4%. Why Investors Care: Gross domestic product is the country’s most comprehensive economic scorecard. GDP is the all-inclusive measure of economic activity. The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy’s undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.
Consumer Sentiment: The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board’s survey. The Consensus Estimate is for a small drop from 68.2 to 60. Why Investors Care: Consumer spending accounts for more than two-thirds of the economy so the pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets.
Charles Posner Philadelphia Federal Reserve President Speaks