The Day Ahead: Durable Goods, New Home Sales, G-20
Equity futures are looking slightly up in anticipation of some major data releases this morning. Global markets have been mixed, while the US$ is stronger and Gold is once again below $1,000 per ounce.
Today’s schedule includes Durable Goods, New Home Sales, and Consumer Sentiment. In addition, headlines from the G-20 summit in Pittsburgh could shake up the afternoon.
One headline so far has been of particular importance for emerging nations. The White House stated earlier that the Group of 20 will become “the permanent council for international economic cooperation,” thereby supplanting the G8.
Key Releases Today:
8:30 ― Orders for Durable Goods jumped 5.1% in July but the gain was mostly accounted for by an 18.5% surge in the transportation component. Without that boost for August, the headline is expected to see a more modest 1.0% gain. Part of the advance this month could be price-driven as rising steel costs push up prices for manufacturers.
“The rebound in machinery should make it another excellent month for core capital goods orders, but lower aircraft orders will temper that strength in the aggregate,” predict analysts from IHS Global Insight.
Economics at BBVA are less optimistic. “New orders of durable goods are forecasted to drop 0.7% as they adjust from last month’s boom in orders of transportation equipment. Nevertheless, the year-over-year rate of decline will show further stabilization, indicating that demand is picking up, although it remains weak.”
9:00 ― Fed Chairman Ben Bernanke will deliver a brief speech at a congressional conference.
10:00 ― The Consumer Sentiment report from Reuters & the University of Michigan jumped more than anticipated with a 4.5-point gain to 70.2 in September. Final revisions should only be better, with stocks continuing to post gains in the past two weeks. However, few economists are expecting that sentiment to translate into consumer spending in the fourth quarter.
10:00 ― Forecasts for New Home Sales are mixed. Housing permits for single-family homes were flat in August, indicating no upwards shifts should take place in the month. But the soon-expiring tax credit for first-time home-buyers should give some incentive for sales. The median estimate is for a 2.8% increase to a sales pace of 445k units, which would put the five-month gain to 34%.
“This will allow new home purchases to push above year-ago levels for the first time since November 2005, a distinction that existing sales achieved in July and still maintained in August,” said Michael Gregory from BMO Capital Markets.
1:15 ― Kevin Warsh, a governor at the Federal Reserve, delivers keynote address entitled “Economic Policy and Market Developments” to the Chicago Federal Reserve Bank's International Banking Conference in Chicago.
In the Wall Street Journal this morning, Warsh wrote an Op-Ed arguing that the central bank still has a critical role to play in creating a sustainable recovery.
“Economic histories in the U.S. and elsewhere are packed with examples in which the monetary authorities, with the overwhelming benefit of hindsight, may have misjudged the communication, timing or force of their exit strategies,” he wrote. Warsh said it would be pre-mature to call the Fed’s actions a success of failure, as the job is only half done.
He added, “If policy is not implemented with skill and force and some sense of proportionality, the success of the overall endeavor could suffer.”