The Day Ahead: Markets Flat Ahead of Income Data
Upbeat earnings and the +3.5% GDP report helped US stocks jump around 2% yesterday, though the gains weren’t enough to wipe out losses from earlier in the week. The market is still down 2.9% from its annual high on October 19.
This morning Dow Futures are looking down 32.00 points at 9871.00, still a ways off from the 10k mark, and the S&P 500 looks to open 4.00 points lower at 1057.50.
Meanwhile, the Treasury yesterday completed its record $123 billion issuance of government-backed securities. Despite the growing deficit, each auction was “heavily oversubscribed, drawing in a total of $372.4 billion in bids, more than three times the offered amount,” said the Wall Street Journal.
The US$ index is flat this morning following heavy losses yesterday as equities rallied. WTI crude oil is down 0.4% to $79.55, and spot gold is off $2 to $1045.
Key Events Today:
8:30 ― The Personal Income & Outlays report could dampen optimism from earnings and GDP data, though the latter report in some sense already stole its thunder. Income is expected to be flat in September after rising 0.2% in August, and spending is forecast to be cut by 0.5% after a 1.3% boost.
“Although weak wage growth and falling employment likely depressed wage and salary compensation, income from other sources should have provided an offset,” said analysts from Nomura. “Consumer spending likely declined by 0.1% m-o-m in nominal terms and by 0.3% after adjusting for price changes. The conclusion of the popular "cash for clunkers" program and resulting plunge in vehicle sales should be the main factor behind the weakness in spending.”
Analysts from IHS Global Insight add that real consumer spending should climb 3% with help autos and other durables. “Looking ahead, we expect more-modest gains as job losses, tight credit, and depleted household net worth restrain consumer spending,” they wrote. “Income growth will remain sluggish in the fourth quarter because of job losses. Core inflation should remain below 1.5% for quite a while, as the unemployment rate is likely to remain high for years.”
9:45 ― The Chicago Business Barometer, commonly referred to as the Chicago PMI, could act as a tie breaker between conflicting regional data reports this month. The Empire State survey shocked analysts by climbing 16 points in the month to +34.6, its highest level in five years, but the Philadelphia survey then tumbled more than 2 points to +11.5. Together those reports point to improvement in the nationwide ISM survey, but forecasters won’t want to put anything in pen until the Chicago numbers come out.
10:00 ― Like its cousin index from Tuesday, the University of Michigan Consumer Sentiment report could tick up with equity prices are slip with the labor market. Investors are bias towards the former outcome with the median forecast looking for a 70.0 score compared to 69.4 in September.