Following a barrage of economic data last week, economic data will remain steady again this week with “market moving” reports coming Wednesday through Friday. The Dow Jones Industrial Average and S&P 500 blasted to new all-time highs last week after the Federal Reserve said that it will hold-off for the time being on tapering its asset purchases known as quantitative easing. The Fed said that it will need to analyze some more data to verify that the economy can continue sustain itself without stimulus, putting economic data firmly back in the spotlight until the next Federal Open Markets Committee meeting at the end of October. In the meantime, though, Wall Street lost its traction on Thursday and Friday to fade from those record highs as traders fell back into “wait and see” mode after apparently already pricing in the tapering that was mostly expected to begin in September.
Some lesser impactful reports will come on Monday with the Flash PMI Manufacturing Index and Consumer Confidence and the S&P Case-Shiller Home Price Index on Tuesday, but then things heat up.
Investors will be looking for:
Durable Goods Orders for August – Last month, the Commerce Department reported that orders for durable goods, products from toasters to aircraft meant to last more than three years, plunged 7.3 percent in July. It was the biggest one-month drop since August 2012 and snapped a streak of three consecutive months of expansion. The volatile transportation segment was primarily responsible for the decline, falling 19.4 percent from June. Excluding transportation, new orders slipped 0.6 percent. Orders for capital goods, viewed as a barometer of future business investments, dropped 3.3 percent in July, after rising in the four prior months. For August, economists are expecting headline new orders to fade another 0.5 percent. Not including transportation, new orders are anticipated to have risen 1.0 percent.
New Home Sales for August – The Commerce Department reported that new home sales sunk 13.4 percent to an annual rate of 394,000 in July from a downwardly revised 455,000 rate in June (down from an original 497,000 estimate). Putting the rate back down to October 2012 levels, that was the sharpest one-month decline in three years and far below estimates, suggesting that rising interest rates were keeping consumers at bay from building new homes. Economists are expecting construction to have picked-up some in August, calling for the annual rate to rise to 420,000.
Second Revision of Q2 Gross Domestic Product – In the first revision of second-quarter GDP last month, the Commerce Department said the U.S. economy was much stronger that initially estimated, boosting GDP growth from a 1.7 percent annualized rate to 2.5 percent. The biggest reasons for the sharp revision was more exports and fewer imports, based upon a more complete compilation of data. In the first quarter, GDP only expanded by 1.1 percent. Headline inflation for the GDP price index was 0.8 percent (upwardly revised for 0.7 percent), while inflation, excluding energy and food, remained at 1.1 percent. Economists are expecting another upward revision for GDP product to 2.7 percent.
Initial Jobless Claims for the Week Ended September 21 – First time filings for jobless benefits have been jumping around in the last two weeks because of computer system updates in California and Nevada that have resulted in not all claims being processed promptly. To that end, the Labor Department reported that initial claims rose to 309,000 in the week ended September 14 from a post-recession low of 294,000 the week prior. The agency said it could take another couple weeks for the two states to have all their claims processed. The four-week moving average, a less volatile measure of labor trends because it flattens weekly variations, declined by 7,000 to 314,750, continuing to hold near six-year lows. For the latest week, economists are expecting claims to climb back up to 329,000.
To a lesser extent, investors will also be looking at the report on Pending Home Sales.
Personal Income and Outlays for August – The Commerce Department said last month that consumer spending and paychecks underwent little change from June to July. Personal income increased 0.1 percent to $14.1 billion and disposable personal income rose 0.2 percent to $21.7 billion, after rising 0.3 percent and 0.2 percent, respectively, in June. Consumer spending increased just 0.1 percent to $16.3 billion, after a 0.6-percent jump in June. Economists expect a 0.4-percent rise in personal income and a 0.3-percent rise in consumer spending. The “Core” PCE price index is expected to show a 0.1-percent rise.
To a lesser extent, investors will be looking at the final reading for September of the Reuters/University of Michigan Consumer Sentiment Index.