The markets swelled to record levels last week as investors interpreted dovish comments from the Federal Reserve and some conflicting views of stimulus to mean that QE3 will last a little longer than perhaps first thought. There is still a strong possibility that the massive easing package may begin to unwind starting in September, but it is likely to be a very slow process and obviously based upon the next few months of economic data. Investors will be looking to Fed Chairman Ben Bernanke testifying before the House and Senate mid-week for additional information, in addition to a steady stream of “market moving” data this week, including:
Retail Sales for June – Last month, the Commerce Department reported a 0.6 percent jump in retail sales in May, up from a modest 0.1 percent expansion in April and outpacing expectations of a 0.5 percent increase. Americans snapped-up more new cars in May, leading the gainers with a 1.8 percent rise. Not including the auto segment, retail sales expanded 0.3 percent, in line with predictions. May was solid, but economists are expecting even more in June, calling for growth of 0.8 percent in headline retail sales and a 0.5 percent increase, excluding autos.
To a lesser extent, investors will be paying attention to the Empire State Manufacturing Survey from the New York Federal Reserve to try and put their finger on the condition of factories in the East.
Consumer Price Index for June – In this heavily watched gauge of inflation, the Labor Department said that the all-items CPI inched up 0.1 percent in May, short of the 0.2 percent increase economists expected and indicating the inflation remains benign in the country in spite of the Fed’s stimulus efforts. So-called “core” CPI, which excludes the volatile food and energy indexes, rose 0.2 percent, in line with expectations. May’s rise was the first after three straight months of declining CPI values. Year-over-year, the all-items CPI was up 1.4 percent, while core CPI was up 1.4 percent, still short of the 2.0 percent increases that the Fed targets. Economists expect June’s CPI to increase again over May, predicting a 0.4 percent rise in headline CPI and 0.2 percent increase in core CPI.
Industrial Production for June – The factory sector has been relatively stagnant in 2013, according to reports from the Federal Reserve, including a zero percent gain in May missing predictions of an increase of 0.1 percent. In April, industrial production contracted by 0.4 percent. There are some wide-ranging estimates from economists for the June report, with the consensus for about a 0.2 percent increase.
Housing Starts for June – Last month, the Commerce Department reported that groundbreaking on new homes reversed course from a more than 16 percent drop in April to a 6.8 percent rise in May and a seasonally adjusted annualized rate of 914,000. In April, the annualized rate exceeded one million, marking the first time the million mark was eclipsed since 2008. Economists are expecting the rate to climb again from May to June, forecasting an annualized rate of 954,000.
Initial Jobless Claims for the Week Ended July 13 – Last week, first-time filings for jobless benefits rose more than expected, increasing by 16,000 to 360,000. The four-week moving average, a less volatile barometer of the labor market, jumped 6,000 to 351,750. This time of year is often regarded as a difficult time to predict because of the July 4 holiday, schools breaking for the summer and some auto plants shutting down for maintenance. Economists are expecting the week of July 6 to have been a bit of a fluke, predicting that this most recent week’s claims will slide back down to about 345,000, the area that jobless claims have been trending for the last couple months.
Philadelphia Fed Survey for June – In a more closely watched report than the Empire Index from the Federal Reserve on Monday, investors look to the Philly Fed Survey for business conditions in mid-Atlantic manufacturers. In May, the index jumped to 12.5 from a -5.2 in April, topping expectations. Readings above zero indicate expansion in manufacturing activity, while below signals contraction. New orders made a big move in May from April, improving from a -7.9 to 16.6. For June, expansion is expected, but at a slower pace than May, with consensus forecasts of a reading around 7.0.