As the clock winds down towards one-third of government employees being furloughed at midnight on Monday if regulators can’t come to a compromise on a budget, stock futures are not surprisingly trading in the red to start the week. Against a backdrop of the shutdown, Treasury Secretary Jacob Lew said that the government will hit its debt limit no later than October 17, raising concern about the possibility of another downgrade on U.S. credit rating because of sovereign debt amid the wrangling in Washington.
The Federal Reserve has been in focus, with analysts scouring through economic reports in recent months trying to gauge when the central bank will scale-back its purchases of $85 billion each month of Treasuries and mortgage-backed securities meant to stimulate the nation’s economy. The angst on Capitol Hill is aligning to wreak havoc on the economy, perhaps taking the idea of the Fed tapering stimulus right off the table for October and maybe 2013.
Economic data this week will be steady, but most is not what is generally considered “market moving” data. To that point, investors will first be looking at the Chicago Purchasing Managers Index and the Dallas Fed Manufacturing Survey on Monday, two reports that typically won’t independently move the markets, but do merit some extra attention.
For the rest of the week, investors will be watching for:
ISM Manufacturing Index for September – Last month, the Institute for Supply Management reported that its manufacturing sector index improved to 55.7 in August from 55.4 percent in July, representing the third straight month of increases. Readings above 50 indicate expansion in factory activity. The new orders index rose to 63.2 from 58.3, hitting its highest level since April 2011. Economists are predicting that the headline index slips back to 55.0 for September.
Also meriting some extra attention are reports on Construction Spending and Motor Vehicle Sales.
Initial Jobless Claims for the Week Ended September 28 – Last week, the Labor Department surprised by saying that California and Nevada were all caught up on their jobless claims applications, yet the total number of claims for the country equaled 305,000 for the week ended September 21. That was far below the 329,000 that was expected. The four-week moving average, a less volatile measure of labor trends, fell to 308,000, marking the lowest level since June 2007. For the latest week, economists are expecting claims to rise to 313,000.
Other reports that will take a back seat to initial jobless claims, but still catch the market’s attention are Factor Orders and the ISM Non-Manufacturing Index.
Employment Situation for September – In its last report, the Labor Department delivered disappointing news that the U.S. added only 169,000 new jobs in August. The unemployment rate edged down to 7.3 percent from 7.4 percent in July, but only because more people gave up looking for work. The proportion of people with a job or actively seeking employment plunged to 63.2 percent, the lowest level in 35 years. Meanwhile, June and July's figures underwent downward revisions, with July's job additions cut to a paltry 104,000 from 162,000 and June's nipped from 188,000 to 172,000. Economists have a rosier view for September, calling for the unemployment rate to hold steady at 7.3 percent and for 182,000 new jobs to have been added during the month.
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