The Day Ahead: CPI, Jobless Claims, Treasury Auction Terms
Equities are moderately positive this morning amid light trading. Investors reacted positively to Spain’s debt auction overnight, giving a boost to Eurozone equities. The Euro too benefited against the dollar, rising to $1.2373.
One hour before the opening bell, Dow futures are up 42 points to 10,386 and S&P 500 futures are up 5.00 points to 1,114.50. READ MORE
NYMEX light crude oil is down $0.02 to 78.70 and Gold is up 8.00 to $1,237.30
Key Events Today:
8:30 ― The Consumer Price Index should be less impacted by oil prices than the producer price index, but the direction is expected to be the same. Prices are set to fall 0.2% in May after a 0.1% cut in April, while core prices are set to rise 0.1% after a flat reading. In sum: the threat of inflation remains benign, allowing the central bank to keep interest rates low.
“Pump prices normally rise sharply at this time of year, but we estimate that they fell slightly in dollar terms in May, which should translate into a 6.3% seasonally adjusted decline. That alone takes 0.3 percentage point off the CPI,” said economists at IHS Global Insight. “The overall CPI decline should be moderated by rising food prices and by a modest 0.1% increase in core prices. Core prices have moved little in recent months, as retailers find consumers reluctant to buy without a price incentive.”
8:30 ― Initial Jobless Claims have been levitating above the 450k range for the entire calendar year so far, disappointing many who assumed the downward trend begun in Q4 last year would continue steadily. Economists are hoping for a 450k figure in the week ending June 17, which is 6k below the prior week’s level.
“Initial jobless claims declined slightly last week but in general have failed to improve much over the last two months. This may indicate that the hiring recovery is proceeding slowly,” said economists at Nomura.
Continuing claims ― a tally of those still receiving unemployment benefits ― fell to 4.462 million in the final week of May, marking the lowest level since late 2008.
10:00 ― Leading Economic Indicators surprised some by breaking a 12-month growth streak in April. But the fall was only by 0.1%, and in May the index is expected to rise by 0.6%, more than erasing the temporary drawback and building upon the 1.3% jump in March.
“An increase in average weekly hours, slightly lower jobless claims, as well as the upward sloping yield curve should contribute positively to the index,” said economists at Nomura. “This may be partially offset by lower stock prices and a small decline in the ISM's vendor performance index. In contrast to the Conference Board's measure, the ECRI weekly leading index has recently turned sharply lower, pointing to slower growth later this year.”
10:00 ― Following the Empire State Survey on Tuesday, the Philly Fed Survey is expected to remain firmly in growth mode in June. The anticipated level is 20.0, or 1.4 points below the headline in May. Estimates range widely from 13.8 to 21.5 ― the low estimates largely result from the new order index dropping to 6.1 from 13.9 last month.
"The Philly Fed index edged higher in May to the second highest reading of this cycle,” said economists at Nomura. “While expect that the region's manufacturing sector will continue to grow, the exceptionally fast pace of growth should begin to slow, in our view. We therefore forecast a decline in the index to 20.0 in June.”
11:00 ― The Treasury announces terms of the following week’s 2-, 5- and 7-year note auctions.