The benchmark indexes in the U.S. posted solid gains last week, largely on the back of strong economic data, especially the latest nonfarm jobs report from the Labor Department showing not nearly 200,000 jobs being created in June, but 70,000 more jobs created in April and May than were originally estimated. This week, economic data is relatively scant, but includes the minutes from the latest meeting of the Federal Reserve three weeks ago. The markets have been reacting to commentary from the Federal Reserve, trying to delineate if, when and to what degree the central bank will begin to taper its stimulus of ultra-low interest rates of purchases of $85 billion each month in Treasuries and mortgage-backed securities. In June, comments from Fed Chairman Ben Bernanke about the possible end of QE3 as early as mid-2014, rattled the markets, sparking a nosedive of about 650 points across four days. A good chuck of those gains have now been recovered, but traders will once again be dissecting the minutes and looking for reasons to react one way or the other based upon what can be gleaned.
No "market moving" data will be coming on Monday or Tuesday. The Fed minutes will be delivered at 2:00 PM EDT Wednesday afternoon. Elsewhere this week, important data will include:
Initial Jobless Claims for the Week Ended July 6 – Last week, the Labor Department said that first-time filings for jobless benefits slipped lower by 5,000 to a seasonally adjusted 343,000, beating economist predictions for about 347,500 claims. The week prior's figure was upwardly revised from 346,000 to 348,000. The four-week moving average, a better gauge of the labor market because it irons out weekly volatility, moved down by 750 to 346,250. Generally speaking, economists view a claims total under 350,000 as a sign of modest growth in the jobs market. For the latest week, there are wide, varying estimates, with an average of economist expectations of 344,000.
Producer Price Index for June – In May, the Commerce Department reported that the PPI rose 0.5 percent, exceeded economist predictions of a 0.1 percent increase. It was the first rise in three months and was led by higher prices in gasoline, eggs and light trucks. Core PPI, which excludes the volatile food and energy segments, rose 0.1 percent, in line with expectations. Year-over-year, both overall PPI and core PPI were up 1.7 percent, a relative tame number as a gauge of inflationary pressures. Economists have mixed views on what the PPI did in June, with consensus expectations around 0.4 percent expansion. Core PPI is expected to rise 0.1 percent.
The markets will also be looking at the first estimate of consumer sentiment for July from Reuters/University of Michigan. For June, final readings of the consumer sentiment index ticked down slightly to 84.1 from 84.5 in May. Economists are expecting the first reading this month to show a rise to 84.8. While this index is not considered by many as "market moving," per se, it is analyzed because consumer sentiment is directly related to consumer spending, a key component that makes up about 70 of economic activity.
With the somewhat slow week in economic data, the market will be looking to Alcoa, Inc. (AA) unofficially kicking-off the latest earnings season on Monday.
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