The Dow Jones Industrial Average inched upward last week to remain seated within earshot of all-time highs. The S&P 500 docked a few points to record its first weekly loss in the past eight weeks, but also is close to hitting its highest level ever. Earnings season is winding to a close as political wrangling is coming into focus again on Capitol Hill with the March 1 deadline for automatic spending cuts quickly approaching. With that in mind, here are some key pieces of economic data that will be delivered this week that could impact the markets as well.
New Home Sales for January – Last month, the Commerce Department reported that new home sales dove off by 7.3% in December to a seasonally adjusted annual rate of 369,000, far below economists’ expectations of a 385,000 pace. The December slide followed the largest spike in 2-1/2 years in November, with starts surging to a 398,000 annual pace. Long-term trends still look good for the housing market with an 8.8% increase year-over-year. For January, economists are predicting and increase in activity to a 381,000 annualized rate.
To a lesser degree, Wall Street will have its eyes on the S&P/Chase-Shiller Home Price Index from December. The Index measures changes in housing prices across 20 U.S. cities. In November, the HPI rose 0.6% and economists are expecting another 0.8% month-over-month increase in the latest report.
Durable Goods Orders for January – Last month the Commerce Department said that orders for durable goods, items meant to last more than three years, expanded by 4.6% in December, mostly because of a spike in aircraft orders. “Core” orders, those that exclude the volatile defense and transportation segments, increase 0.2%, following two months of larger gains. Economists expect overall new orders to have contracted by about 4% in January, but for “core” durable orders to have grown 0.2 percent.
To a lesser extent, investors will be watching for pending home sales, contracts that have been signed, but not yet closed, for January from the National Association of Realtors to try and keep a finger on the pulse of the housing market.
Gross Domestic Product for the Fourth Quarter – GDP, the broadest measure of combined economic activity in the country, contracted by 0.1% in the October to December quarter of 2012, according to the “advance” estimate from the Commerce Department in January. It was the first time GDP was negative in more than three years, sparking concerns about the economy stalling to start 2013. Economists are expecting that GDP did not shrink, but expanded by 0.5% for the fourth quarter.
Initial Jobless Claims for the Week Ended February 23 – In its weekly report, the Labor Department said that first time applications for jobless benefits rose by 20,000 to 362,000 in the week ended February 16. The four-week moving average, generally regarded as a better reflection of the jobs market because it eliminates volatility, rose by 8,000 to 360,750. Economists are expecting a basically flat week in the upcoming report, calling for new claims to slip to 360,000.
Investors will also be watching for the Chicago Purchasing Managers Index for February from the Institute for Supply Management. The report is considered a barometer of future manufacturing activity in the Chicago region. In January, the index jumped 5.6 points to 55.6. Readings above 50 indicate expansion in the business sector. A 55.0 reading is expected for February.
Personal Income and Outlays for January – In December, personal income rose by a strong 2.6%, largely because of special dividends from company’s looking to avoid hikes in income taxes set to go in effect in January. With that in mind, economists are expecting a contraction of about 2.0% in January for personal income. Personal spending, or “outlays,” didn’t change much in December, rising only 0.2%. Economists are anticipating a similar size rise in outlays from January to be reported by the Commerce Department.
ISM Manufacturing Index for February – in January, the Institute for Supply Management said that its manufacturing index rose to 53.1 from a 50.2 mark in December. It was the highest reading in nine months. Scores over 50 in the diffusion index indicate expansion in manufacturing activity on a national level. Economists are expecting a tepid month-to-month fall to 52.8 in February, although the prediction still signals increased activity in general.
Friday actually brings a bevy of data. While the Personal Income/Outlays and ISM information will bear the most weight, investors will also be paying attention to the Thomson Reuters/University of Michigan Consumer Sentiment Index, Construction Spending data from the Census Bureau and the latest Purchasing Managers Manufacturing Index from Markit.