With the government shutdown now a couple weeks behind the nation, economic reports are once again coming on schedule. Wall Street didn’t pay a great deal of attention to the weaker-than-expected September non-farms payroll report, in fact it was treated kindly as a further signal that the Federal Reserve likely won’t start ratcheting down its purchases of $85 billion every month in Treasuries and mortgage-backed securities any time soon. The Federal Open Market Committee is meeting on Tuesday and Wednesday with commentary following at 2 PM ET Wednesday, with most the Fed to announce that it is keeping its monetary policy unchanged. The markets still look a bit frothy with the S&P 500 at record highs, the Dow starting the week 139 points from all-time intraday highs and the Nasdaq at 13-year highs, but the bulls ended last week stepping on the faces of the bears amid a flurry of mostly optimistic earnings reports, despite budget uncertainty in the States.
To that point, earnings reports will continue to stream in and the markets will get a healthy dose of economic data this week, including:
Monday
Industrial Production for September – Last month, the Federal Reserve reported that industrial production, output at factories, mines and utilities, rose by 0.4 percent in August, representing the biggest jump in six months. Vehicle sales paced the gains with a 5.2-percent increase. Manufacturing improved by 0.7 percent. Capacity utilization, which measures the number of plants in use, increased to 77.8 percent from 77.6 percent in July. This month, economists are expecting industrial production to rise 0.4 percent again and capacity utilization to eke up to 78.0 percent.
To a lesser extent, the markets will also be watching Pending Home Sales and the Dallas Fed Manufacturing Survey.
Tuesday
Producer Price Index for September – For August, the Labor Department reported that the PPI, which measures prices paid to factories, refineries and farms, increased by 0.3 percent from July, following no change from June to July, indicating the inflation remains muted. "Core" PPI, which excludes energy and food, was flat in August from July, breaking a string of nine consecutive monthly advances and missing expectations of a 0.1-percent rise. For September, economists are targeting a 0.2-percent increase in headline PPI from August and a 0.1-percent increase in the core level.
Retail Sales for September – Last month, the Commerce Department reported that retail sales rose less than expected in August, signaling that Americans started the second half of the year with a tight hold on their wallets. Retail sales increased 0.2 percent in August from July to $426.6 billion. Excluding-autos, retail sales increased 0.1 percent. Economists are calling for a flat month in the headline figure and a 0.4-percent increase in the ex-autos figure.
To a lesser extent, investors will be looking at the S&P/Case-Shiller Home Price Index and Consumer Confidence.
Wednesday
Consumer Price Index for September – In August, the CPI rose 0.1 percent, according to the Labor Department, after rising 0.2 percent in July, signaling that inflation remains tame in the US. The gains were mostly the result of higher costs for rent and medical care. Compared to last August, the index increased 1.5 percent, following 2.0-percent rise in July. “Core” CPI, which excludes the volatile food and energy categories, also rose 0.1 percent in August. Economists are expecting a 0.2-percent climb for both the headline and core figures for September.
FOMC Meeting Announcement – As mentioned above, the Fed will be making a statement following the conclusion of its two-day meeting on Wednesday. This will be a closely watched announcement as Wall Street looks for any indication as to when the main bank may begin putting the brakes on its massive quantitative easing program.
To a lesser extent, traders will be looking to the ADP Employment Report to try and delineate the state of the jobs situation in the U.S. that has been clouded by the government shutdown.
Thursday
Initial Jobless Claims for the Week Ended October 26 – For the week ended October 19, the Labor Department said that first-time filings for jobless benefits declined by 12,000 to 350,000. The four-week average of claims, a less volatile measure of labor trends, rose by 10,750 to 348,250 to mark the highest level since early July. Initial claims have been difficult to predict and are likely not giving an accurate read to the health of the labor markets because of the government shutdown and a technical glitch from a computer upgrade in California that have inflated numbers recently. As time goes forward, these short-term factors will be ironed out of the data, but for the time being, the data is a bit skewed. For the latest week, economists are expecting claims to drop to 335,000.
To a lesser extent, the markets will be looking at the Chicago Purchasing Managers Index.
Friday
ISM Manufacturing Index for October – Last month, the Institute for Supply Management said its survey of activity at manufacturers increased to 56.2 for September from a 55.7 reading in August. Readings over 50 indicate expansion in manufacturing. New orders, a leading indicator of the health of the manufacturing sector, dipped to 60.5 from 63.2 in August. For October, economists expect the headline index to decline to 55.0, still showing growth, but at a slower pace than the month prior.
To a lesser extent, investors will be monitoring Motor Vehicle Sales for October and the PMI Manufacturing Index.
