Markets Tame Ahead of GDP and October Unemployment Rate

The markets essentially muddled sideways on Monday and early-morning futures are pointing to a lower open on Tuesday as traders are cautious ahead of some big economic data late in the week.  A Monday report on factory orders for September from the Commerce Department showed a 1.7-percent jump in orders on the back of demand in the volatile commercial aircraft segment.  Stripping out transportation, orders declined by 1.3 percent, signaling slower economic growth.

Tuesday will feature the Institute for Supply Management’s Non-Manufacturing Index, a piece of data that will garner some extra attention, but generally not considered “market moving” information.  Investors are trying to glean whatever they can from every report, though, to try and gauge what the Federal Reserve will do with regards to slowing its purchases of $85 billion each month in Treasuries and mortgage-backed securities, known as quantitative easing.  Data recently has been patchy at best, keeping Wall Street guessing.

Some impactful data that will be delivered later this week:

Thursday

Gross Domestic Product Q3 – In the first quarter of 2013, economic growth was a sluggish 1.1 percent.  The third and final revision of second-quarter GDP, the output of goods and services produced by labor and property, was held at an annualized rate of 2.5 percent.  There were not many substantial revisions in the final reading of Q2 GDP, although inflation, as measured by the personal consumption expenditure index was lowered by 10 basis points to show a decline of 0.1 percent.  That was the first negative figure since the last quarter of the Great Recession.   Economists are expecting GDP to show 2.1-percent growth in the third quarter.  Although GDP is backward-looking, analysts will be interested in the third quarter reading to measure economic activity ahead of the 16-day government shutdown that started the fourth quarter.

Initial Jobless Claims for the Week Ended November 2 – For the week ended October 26, the Labor Department estimated that first-time filings for jobless benefits totaled 340,000, representing a drop of 10,000 from the week prior’s unrevised figure.  California was reported to finally have its backlog of claims up to date after a computer system upgrade and did not artificially inflate the number last week.  Claims have spiked recently because of the technical glitches in California and the partial government shutdown, sending the four-week moving average up to 356,2000 in the latest report, representing the highest level since April.  As time moves forward, those short-term factors will begin to disappear.  For the recent week, economists are expecting claims to total 335,000.

Friday

Employment Situation for October – In September, nonfarm payrolls increased by 148,000 following a revised 193,000 job additions in August (up from an original 169,000 estimate), according to the Labor Department.  July’s figure, which had previously been revised substantially lower, was dropped again to only show 89,000 new jobs, the worst month since July 2012.  The unemployment rate in September edged down to 7.2 percent from 7.3 percent in August, mostly because the participation rate held at 35-year lows.  The tepid jobs growth and lack of information so far to measure any lasting impact of the government shutdown is unlikely to persuade the Fed to begin hitting the brakes on its monetary stimulus policy.  Economists are certainly not expecting much given the half-month shutdown in October, calling for 110,000 new jobs and for the unemployment rate to inch back up to 7.3 percent.  Investors will also be closely watching for revisions from prior months as a sign of the direction of labor trends.

Personal Income and Outlays for September – The Commerce Department reported that household spending increased 0.3 percent in August, representing the biggest one-month jump in six months.  Incomes rose 0.4 percent, the largest gain since February.  So-called “core” inflation, which doesn’t include the volatile food and energy segments, rose 1.2 percent compared to August 2012, continuing a trend of benign inflation for the year.  For September, economists are calling for another 0.3-percent increase in consumer spending and a 0.3-percent rise in personal income.  The core PCE index is anticipated to have risen 0.1 percent from August.