Market Focus: It’s another week filled with Fed Speak after a weaker than expected jobs report. All the talk will be around when will the Fed raise rates? This week’s reports are centered around sales, inventories, and prices. All of this is the data that the Fed keeps insisting will rule their decision. Call me crazy but I still think oil is a driver of the markets lately. Just as an aside I do not think anyone claimed the powerball yet!
Information provided below from Bloomberg.
Charles Evans (Chicago Federal Reserve President) Speaks
Neel Kashkari (Minneapolis Federal Reserve President) Speaks
NFIB Small Business Optimism Index: The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job opening, expected credit conditions, now a good time to expand, and earnings trend. The Consensus Estimate is for an increase from 92.6 to 93.1. What it means to you: Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market.
Wholesale Trade: Wholesale trade measures the dollar value of sales made and inventories held by merchant wholesalers. It is a component of business sales and inventories. What it means to you: Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a slower rate of growth that won’t lead to inflationary pressures. Wholesale sales and inventory data give investors a chance to look below the surface of the visible consumer economy.
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. What it means to you: 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. What it means to you: The pattern in consumer spending is often the foremost influence on stock and bond markets.
3 Year Note Auction
Treasury Budget: The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance of the annual fiscal year (which begins in October) are followed as an indicator of budgetary trends and the thrust of fiscal policy. What it means to you: In addition to following the trend in the budget deficit or surplus, investors can gain valuable insight to the state of the economy by looking at the government’s tax receipts. Higher tax receipts lead to an improved deficit situation when economic conditions are strong; conversely, lower tax receipts reflect a sluggish economic environment.
EIA Petroleum Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S. The level of inventories helps determine prices for petroleum products. What it means to you: 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.
10 Year Note Auction
Weekly Jobless Claims: New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility. The consensus estimate is for a decrease from 274,000 to 267,000. What it means to you: By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it’s a good bet that interest rates will rise.
Import and Export Prices: Import price indexes are compiled for the prices of goods that are bought in the United States but produced abroad and export price indexes are developed for the prices of goods sold abroad but produced domestically. These prices indicate inflationary trends in internationally traded products. The consensus estimate is for export prices to remain the same as last month’s 0% but import prices to be .6% after last month at .2%. What it means to you: Changes in import and export prices are a valuable gauge of inflation here and abroad. Furthermore, the data can directly impact the financial markets such as bonds and the dollar.
Bloomberg Consumer Comfort Index: A weekly, random-sample survey tracking Americans’ views on the condition of the U.S. economy, their personal finances and the buying climate. What it means to you: The pattern in consumer attitudes can be a key influence on stock and bond markets. Consumer spending drives two-thirds of the economy and if the consumer is not confident, the consumer will not be willing to spend. Confidence impacts consumer spending which affects economic growth.
Loretta Mester (Cleveland Federal Reserve President) Speaks
Eric Rosengren (Boston Federal Reserve President) Speaks
Esther George (Kansas City Federal Reserve President) Speaks
10 Year Note Auction
Retail Sales: Retail sales measure the total receipts at stores that sell durable and nondurable goods. Consumer spending accounts for two-thirds of GDP and is therefore a key element in economic growth. The consensus estimate is for a rise of .9% more than last month’s -.3%. And an increase of .4% excluding autos and gas after last month’s .1% increase. What it means to you: Retail sales are a major indicator of consumer spending trends because they account for nearly one-half of total consumer spending and approximately one-third of aggregate economic activity
Producer Price Index: The Producer Price Index (PPI) is a measure of the average price level for a fixed basket of capital and consumer goods received by producers. The consensus estimate is for a .3% gain in the overall number and a .1% gain in the core rate. Higher than last month’s -.1% and still very low. What it means to you: Changes in the producer price index for finished goods are considered a precursor of consumer price inflation. If the prices that manufacturers pay for their raw materials rise, they would have to raise the prices that consumers pay for their finished goods in order to not decrease profit margins. Changes in the supply and demand for labor will affect wage changes with a delay because wages are institutionalized and contractual. However, commodity prices react more quickly to changes in supply and demand.
Business Inventories: Business inventories are the dollar amount of inventories held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity. The consensus estimate is for an increase of .2% after last month’s -.1%. This will still leave inventories historically low. What it means to you: Rising inventories can be an indication of business optimism that sales will be growing in the coming months. By looking at the ratio of inventories to sales, investors can see whether production demands will expand or contract in the near future. For example, if inventory growth lags sales growth, then manufacturers will have to boost production lest commodity shortages occur. On the other hand, if unintended inventory accumulation occurs (that is, sales do not meet expectations), then production will probably have to slow while those inventories are worked down.
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. The consensus estimate is for a reading of 89.7. A slight increase after last month’s 89. What it means to you: Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it’s easy to see how this index of consumer attitudes gives insight to the direction of the economy.
John Williams (San Francisco Federal Reserve President) Speaks