The Day Ahead: PPI, Industrial Production, TIC Flows, Housing Confidence

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Equity markets are looking down before the bell but the losses are modest compared to the Monday rally. 

S&P 500 futures are off 2.1 points to 1,104 and Dow future have shed 5 points to 10,363. On Monday investors pushed the S&P up nearly 16 points, or 1.45%, to a new 13-month high. The Dow saw a 1.33% gain to 10,407.

Meanwhile, emerging from a 15-month low the dollar index is up 0.4% to 75.20 a day after Fed chairman Ben Bernanke said the Fed would “help ensure that the dollar is strong.”

In line with equities, WTI Crude oil is off 34 cents to $78.56 per barrel, and Spot Gold is trading $8.26 lower at $1,131.

In earnings, Home Depot said sales fell 8% in the third quarter. The CEO said “there is still a great deal of pressure in the housing and home improvement markets, though there are some positive signs of stabilization.” Markets will hear from Target later in the day.

Key Events Today:

8:30 ― The Producer Price Index isn’t likely to gain much attention. Inflation remains on the back-burner and those who are interested prefer to track consumer prices which come out just a day later. The consensus from economists is for prices to rise 0.5% in October, which would seem alarming if prices hadn’t fallen 0.6% in September. Similarly, core prices are set to rise 0.1%, mitigating the 0.1% drop in the prior month.

9:00 ― TIC Flows, the Treasury’s look at the flow of financial instruments to and from the United States, is released for September. Analysts will be looking for how international appetite is holding up for Treasuries, equities, and corporate bonds.

9:15 ― Industrial Production is set to rise for the third consecutive month in October. In the manufacturing sector, production is up and new jobs could soon be a reality.

“Hours worked in manufacturing fell by 0.4% in October, but we anticipate another large gain in manufacturing productivity; output per hour in manufacturing zoomed at a 13.6% annual rate in the third quarter, climbing at a 21.2% annual rate in durables,” said economists from IHS Global Insight. They add that utility output should be boosted by abnormally cold fall weather.

10:00 ― Jeffrey Lacker, president of the Richmond Fed, speaks on the economic outlook to the Virginia House Appropriations Committee in Richmond.

1:00 ― The Housing Market Index measures homebuilder sentiment. The soft data gets a look from analysts but more attention will be given to the hard data on new construction which comes out Wednesday. Ratings below 50 indicate general pessimism about the market, so the current reading of 18 doesn’t exactly inspire confidence, even if it’s double the score of 9 ― an all-time low ― seen from November 2008 to last March.

Ben Bernanke spoke in New York yesterday, his messages continue to be cautiously optimistic: “Housing faces important problems, including continuing high foreclosure rates, but residential investment should become a small positive for growth next year rather than a significant drag, as has been the case for the past several years.”

 

  • Treasury Auctions:
  • 11:30 ― 4-Week Bills
  • 11:30 ― 52-Week Bills