A quiet week for economic data will be highlighted by the FOMC meeting. The amount of economic reports set for release this week is very light, but the reports scheduled could have an impact on trading. Below is the calendar for the week:
Monday: Leading Indicators
Tuesday: ICSC-Goldman Store Sales, Redbook, FHFA House Price Index
Wednesday: MBA Mortgage Applications, EIA Petroleum Status Report, FOMC Meeting Announcement
Thursday: Jobless Claims, Existing Home Sales
Friday: Durable Goods Orders, Consumer Sentiment, New Home Sales
The FOMC meeting is not expected to result in a change in the Fed funds target rate, but what the committee has to say about a possible exit strategy could impact trading. The Fed has noted that interest rates will stay low for an extended period of time, but this the committee could announce changes to its balance sheet expansion and/or planned unwinding. Economists are expecting the committee to announce it will start to slow the pace of purchases of mortgage backed securities. The Fed knows the economy is still in a precarious situation, but they have to be diligent in making sure that they return to a normal policy at the right time to avoid huge problems, most importantly inflation.
Economic data across the board is showing improvement, including the beleaguered housing sector. Lennar (LEN) stated Monday morning that it expects to return to profitability in fiscal 2010. There are several housing related reports on tap this week and this data is expected to show this improvement. Existing home sales for August are expected to rise to an annualized rate of 5.35 million units, up from 5.24 million in July. If a gain does occur, it would be the fifth consecutive monthly advance. New home sales are set to rise to 445,000 annualized units, up from 433,000 in July. Improvement in sales has been pushing supply down and this component of the reports will get attention.
Durable goods orders for August are expected to rise again for the second consecutive month. In July, orders for durable goods rose 5.1 percent and are expected to rise 1.0 percent in August. July's strength was due to transportation orders, though non-transportation durable goods orders still rose 1.1 percent. Economists also expect orders for core capital equipment goods to increase with business investment in equipment adding to growth for the first time since 2007.
The jobs market has been lagging during the economic recovery with jobless claims and nonfarm payrolls still weak. Jobless claims for the week ending Sept. 19 are expected to rise slightly to 550K from 545K in the prior week. Though off the highs seen earlier in the year above 650K, jobless claims are still well above the 350K level common a few years ago.
The University of Michigan Consumer Sentiment Index for September is due out Friday and is expected to rise to 70.2 from 65.7 in August. This would match the mid-month reading. Interestingly, it was one year ago that this index saw a one month spike to 70.0, although this strength didn't last and the index fell below 60 the following month. This index still has work to do to get back to readings between 80 and nearly a 100 seen before 2008.
Leading indicators rose 0.6 percent in August, matching expectations with July's gain revised to a gain of 0.9 percent, up 3-tenths from the initial reading. The biggest negatives were a contraction in money supply, followed by rising initial jobless claims and a decline in capital goods orders. However, these components have shown improvement since August. The coincident index for July was revised sharply higher to growth of 0.1 percent from an initial reading of 0.5 percent. This data points to July as being the month the recession ended.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
