The Week Ahead: Full Moons, Hurricanes, Month-End, And NFP

NOTE: "Due to Hurricane Sandy and severe weather, SIFMA recommends an early close of 12:00pm EST on Monday, October 29, 2012 for the trading of US dollar-denominated fixed-income securities in the United States. SIFMA will continue to monitor conditions (market, weather, infrastructure) to determine any additional recommendations for Tuesday." read more...  

Even before it begins, the week ahead is getting off to a tumultuous start with Hurricane Sandy expected to drastically increase in severity into Monday morning.  Over 370,000 evacuations have already been ordered for the highest flood-risk areas in New York City alone.  SIFMA recommends an early close which would normally mean that we could safely expect bond markets to simply stop trading at the recommended time.  This recommendation is naturally unscheduled and is also 2 hours earlier than the standard-issue early close, so we can't say for sure that there will be no additional activity in MBS after 12:00pm, but whatever activity there is, will be extremely limited. 

Even before the early close, participation will likely remain light despite the first of several significant mornings of economic data.  Personal Consumption Expenditures prints at 8:30am and is expected to show an increase in consumer spending from 0.5% to 0.6%. 

The pace of data only quickens throughout the week with Consumer Confidence and Case Shiller Home Prices on Tuesday and month-end tradeflow considerations on Wednesday.  Then on Thursday, an already full slate of top-shelf data gets an infrequent visitor that normally reports on Wednesdays.  The ADP employment data--always a spicy source of debate as to its NFP forecasting significance--debuts in it's new and improved format which may or may not prove to be more highly correlative with NFP private payrolls.  ADP is careful to note that the enhancements should improve the correlation with the FINAL REVISIONS to NFP as opposed to the headline that follows on Friday morning.

Speaking of NFP headlines on Friday mornings, the official Employment Situation Report will be released at 8:30am this Friday (also referred to by its most important component, "nonfarm payrolls," or simply "NFP").  This one is interesting to us because it's a chance to confirm that last month's "as-expected" reading was actually ending the recent trend of weaker-than-expected results and generally stagnant growth.