After taking a break on Monday in observance of Labor Day, big acquisition news is initially in the forefront of the markets on Tuesday with Microsoft (MSFT) , Nokia (NOK) , and Verizon (VZ) involved in huge deals. A potential strike on Syria is still in the balance, but economic data will also be in focus again this week ahead of the upcoming meeting of the Federal Open Market Committee that runs from September 17 – 18. Until then, investors will continue their efforts to scour through economic data to try and gauge if and when the Federal Reserve will begin slowing its policy of buying $85 billion per month in Treasuries and mortgage-backed securities that have been attributed for propping-up the US economy.
Some “market moving” data that will be delivered this week includes:
ISM Manufacturing Index for August – Last month, the Institute for Supply Management reported that its manufacturing index rose 4.5 points to 55.4 in July, a sharp move that took the index to its highest level since August 2011. Readings over 50 indicate expansion in factory activity, while below indicates contraction. New orders were particularly strong, jumping from 51.9 in June to 58.3 in July. The employment index also made a large move, climbing back into expansion territory at 54.4 from 48.7 in June. For August, economists are expecting the headline index to drop to 53.9.
Also on tap for Tuesday, to a lesser extent, is construction spending for July from the Commerce Department and the Markit PMI manufacturing flash index for August.
International Trade for July – For June, the Commerce Department said that the U.S. trade deficit narrowed by 22.4 percent, representing the largest one-month drop since February 2009. Imports decreased to $225.4 billion while exports increased to a record $191.2 billion, moving the trade deficit to $34.2 billion from a revised $44.1 billion shortfall in May. June’s trade deficit was the smallest since October 2009. For July, the markets expect the deficit to widen back out to $39.0 billion.
Initial Jobless Claims for the Week Ended August 31 – For the week ended August 24, the Labor Department said that first time filings for jobless benefits dropped to 331,000 from a revised 337,000 the week prior. The four-week moving average continues to hold near pre-recession lows, although it modestly rose by 750 to 331,250. Continuing claims dropped by 14,000 to 2.99 million. These claims will be closely watched as a precursor to the bigger jobs report coming on Friday. Economists expect claims for last week to tick down a touch to 330,000.
To a lesser degree, traders will also be looking for ADP’s employment report for August, July’s factory orders from the Commerce Department and ISM’s non-manufacturing index for August.
Employment Situation for August – Often referred to as the “non-farms payroll” report, this will be the most-watched report for the week. For July, the Labor Department said that the U.S. added 162,000 new jobs (missing expectations of 175,000). Because of the new jobs and more people giving up on actively looking for work, the unemployment rate fell from 7.6 percent in June to 7.4 percent in July (beating predictions of 7.5 percent). For August, economists are predicting the unemployment rate to hold at 7.4 percent and for the country to have created about 174,000 new jobs.
The Federal Reserve has regularly stated that a strong jobs market is a critical component in their decision to begin tapering QE3. With the FOMC meeting coming in a couple weeks, the markets will be paying particularly close attention to the employment situation report.