The Week Ahead: Full Week of Data

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Treasuries are little changed from Friday's levels but the stock market, after losing more than 6% last week, is preparing to rebound in early trading.

This week's focus will be on passage of the EFSF's expanded powers and Greece's 2nd bailout package, according to BMO Capital Markets, which added: "There are quite a few Eurozone governments meeting to talk about the debt crisis and the urgent need to resolve it." 

Before it all begins, the 10-year and 30-year Treasury yields are a basis point up at 1.84% and 2.91%, respectively, while the two-year yield is flat at 0.22%. 

S&P 500 futures are 16.7 points higher at 1,146.50, reflecting a 1.48% gain. Dow futures are 137 points up at 10,834, a 1.28% jump.

Light crude oil, after falling 9% last week, moved 0.25% lower overnight to $80.30 per barrel, and gold prices declined 0.40% to $1,633.30.

Key Events This Week: 

Monday:

9:30 - James Bullard, president of the St. Louis Fed, speaks on a panel discussing policy after the crisis in New York.

10:00 - New Home Sales continue to stagnate. The annualized figure in July declined 0.7% to 298k units and the median estimate for August is 295k. While forecasts range from 275k to 320k, the optimistic readings are still abysmal in the wider scheme of things.

"Sales for the year so far are on track to finish with barely more than 300,000 homes sold," Citigroup noted. "The average selling rate is down 6% from 2010, which was already the weakest year in the nearly 50 year record. The current sales rate is more than 75% below the peak sales year of 2005."

Nomura Global Economics expects to see a 4.4% drop this month to 285k units, based on recent mortgage application volume.

"Surprisingly, building permits for single-family units increased 2.5% in August, which lends some upside risk to the forecast," they said. "According to the Census Bureau, only houses sold prior to being built or those that are built for sale are counted as a new home sale, so strength in building permits in August would indicate stronger new home sales."

3:00 - Narayana Kocherlakota, president of the Minneapolis Fed, speaks on a sovereign debt panel in Chicago.

 

  • Treasury Auctions:
  • 11:30 - 3-Month Bills
  • 11:30 - 6-Month Bills

 

Tuesday:

9:00 - The S&P Case-Shiller Home Price Index reported that prices were down 4.5% year-over-year in June. Economists now see signs of stabilization as a decline in mortgage rates spurs activity. One pillar of support for this argument is the FHFA monthly index - it has inched up each of the last four months.

"Taking into account variations in other home price indices over the May-July period, which have already been reported by private research firms such as Zillow.com and Core Logic, the year-over-year change rate of the index likely improved in July from -4.5% in June," said Nomura Global Economics, who forecast the y-o-y rate at -4.2%.

10:00 - The Conference Board's Consumer Confidence index fell nearly 25% in August as it dropped 14.7 points to 44.5, its lowest since April 2009. Not much has improved since then, so the debate is whether the index will deteriorate further or simply sit at this low level.

"Incoming data have weakened recently and equity markets have fallen sharply, suggesting extremely soft consumer confidence," Citigroup said. "However, the confidence index already plummeted in August, as the political process dominated headlines and expectations. That move went further than the fundamental data suggested at that time."

IHS Global Insight notes that last week's plunge in equities following the Fed's policy statement probably came after the survey period ended, so didn't do extra damage to the September confidence reading. One could even argue for upside risk given the five straight days of equity gains seen in the week before. 

12:30 - Dennis Lockhart, president of the Atlanta Fed, speaks on the U.S. economy to the World Affairs Council in Jacksonville.

 

  • Treasury Auctions:
  • 11:30 - 4-Week Bills
  • 1:00 - 2-Year Notes

 

Wednesday:

2:40am - Eric Rosengren, president of the Boston Fed, addresses Swedbank Economic Outlook Seminar in Stockholm.

8:30 - New Orders for Durable Goods jumped 4% in July on account of aircraft offers. That sets up August for a decline, economists say, and the median estimate is -0.4%. However, several economists noted aircraft orders had another stellar month, so the expected decline following a surge might have to wait a month.

IHS Global Insight notes that Boeing received another 100-airplane order, this time from Delta, so aircraft orders should climb higher. "But the rest of the picture won't look good," they said. "Core capital goods orders should fall about 1%, and motor vehicle and metals orders should be down sharply after a very strong July."

Citigroup actually predicts a 0.7% advance in August.

"Once again, civilian aircraft orders appear set to substantially boost the total," they said. "Apart from aircraft, transportation was weaker on lower truck assemblies. In July, nearly two-thirds of the increase in ex-transportation new orders was from a spike in primary metals. The reversal of this surge accounts for the bulk of our expected decline in August."

 

  • Treasury Auctions:
  • 1:00 - 5-Year Notes

 

Thursday:

8:30 - A new round or revisions to second-quarter GDP is expected to lift the growth rate to 1.2% from 1%. The improved rate, albeit still very slow, is based on private non-residential construction and slightly better trade data (net exports).

"The faster pace of growth does not alter our perception that the economy was extremely weak in the first half," Citigroup said, predicting a higher-than-consensus 1.4%. 

"After the dismal first half, we expect a pickup in third quarter growth, which will signal that much of the earlier weakness was temporary," they added. "The latest data show that the economy actually was on an upswing in July, before the latest shock to financial conditions. However, now that financial conditions have taken the hit and risk appetites are smaller, we think any resurgence in third quarter growth will be short-circuited.

8:30 - After falling 9,000 in the previous week, Initial Jobless Claims are expected to come in at 420,000 in the week ending September 24, in line the four-week average of 421k. 

Citigroup expects to see just 410k claims, which would be a seven-week low, but say the four-week moving average "remained elevated at a level consistent with lackluster payroll activity."

Continuing claims were 3.742 million in the week ending September 10. Nomura Global Economics notes this gauge has been unable to fall below 3.7 million, "dipping below that level in only three separate occasions this year." 

"The downward trend in claims has stalled in recent weeks," Nomura said, "likely the result of increased layoff announcements."

8:30 - Eric Rosengren, president of the Boston Fed, speaks on how supervision can detect failtures to the Global Interdepence Center conference in Stockholm.

8:30 - Charles Plosser, president of the Philadelphia Fed, speaks on the economy to business leaders at Villanova University.

10:00 - The Pending Home Sales Index fell 1.3% in July, marking the first drop in a few months. The index was still up 14.4% above year-ago levels, but economists see room in the fall in the coming months. The August median estimate is -2%. 

 

  • Treasury Auctions:
  • 1:00 - 7-Year Notes

 

Friday:

8:30 - The Personal Income & Outlays report is anticipated to show some paltry returns in August. Income is to rise only 0.1%, following gains of 0.3% and 0.2% in the prior two months, while consumption is set to rise 0.2%, following a 0.8% jump in July.

"Weak employment conditions continue to weigh on personal income, with the August report indicating no job growth and a reduction in average earnings," said BBVA. "Continued declines in consumer confidence and flat retail sales for the month suggest conservative spending, particularly after July's surprising jump. Although higher food and energy prices may have contributed to growth in nominal terms, we expect real growth to be minimal."

Nomura Global Economics added that average hourly earnings declined 0.1% in August and employment growth was flat, providing the underpinnings for incomes falling 0.1%.

"We expect spending to increase by 0.3% in August, reflecting an increase in prices," they said. "We expect a headline increase in the PCE price index of 0.3%, which will temper spending in real terms, and we expect core prices to increase by 0.2% m-o-m, which translates into a y-o-y increase of 1.7% compared to 1.5% in July."

9:45 - The Chicago Business Barometer, which tracks the manufacturing and service sectors, has been relatively robust recently despite much slowing down. In August the index fell to 56.5 from 58.8 in July, recording the slowest reading since November 2009. Yet that level was higher than any economist had forecast, as comparable indexes from Philadelphia and New York have been much more volatile. The September index is expected to fall further to 55.5, but that's still well into growth mode. 

"Regional manufacturing surveys conducted in early September have shown mixed results, continuing the recent trend of geographical diversion among the economic situation of manufacturers," said Nomura Global Economics. "We expect the Chicago PMI to reflect continued stress on current business conditions in September."

Citigroup noted the Chicago index can be more stable based on how its overall figure is constructed.

"Unlike the Philadelphia Fed index, which can be a subjective assessment of the general business climate, the Chicago and the national ISM indexes are weighted averages of their components," they said. "These components attempt to gauge changes in actual activity. We think this is why the Chicago PMI and the ISMs have been much tamer in recent months, relative to the extremely downbeat Philly survey."

9:55 - Consumer Sentiment is expected to inch forward to 56.8 in September, up from 55.7 in August. The August score represented an 8-point drop to the lowest level since November 2008. A preliminary reading this month showed the index rebound slightly to 57.8, which is now seen as a bit too optimistic given recent volatility and sell-off in the equity market. Whatever the exact figure, the survey sits at recessionary levels.

"The damaging effects on confidence from the debt ceiling crisis and the S&P downgrade may be starting to wear off, but financial markets remain in turmoil and the latest stock market plunge following the Fed's policy decision will reinforce consumer fears of recession," said IHS Global Insight. 

11:00 - James Bullard, president of the St. Louis Federal Reserve, speaks at Point Loma Nazarene University in San Diego.