The week begins with a slow start as no data will be released on Monday. Markets will likely look for news of how $75 billion will be raised by the ten banks in need of extra capital, as per the Stress Tests published last Thursday.
Financial shares soared 23% last week, boosting U.S. markets 5.9% even with Friday’s news that more than half-a-million jobs were lost in April. In 2009 so far, the S&P 500 has advanced 4.33% to 929.23, just below its 40-week moving average of 943.
Whether markets will continue advancing this week is anyone’s guess, but analysts’ forecasts for this week’s data are somewhat optimistic.
The key data points this week will be Retail Sales (Wednesday), Industrial Production (Friday), and the Consumer Price Index (Friday). The April data is expected to confirm that consumers were back at the malls in April, while industrial production likely dipped 0.6%, and inflation was stable.
From the Federal Reserve, chairman Ben Bernanke speaks Monday night at 6:30 pm EST. Last week, Bernanke encouraged macroprudential oversight, and over the weekend the Obama administration said they may propose legislation for the Fed to play such a role.
Atlanta Fed President Dennis Lockhart will also speak on Tuesday morning at 8:20 am.
Chairman Bernanke speaks at 6:30 pm.
The U.S. Trade Balance is expected to record a deficit of $27.5 billion for March, following a $26 billion deficit in March. The trade balance has been shrinking dramatically in recent months, which is usually considered good news, but in the current context the decreasing deficit is a result of falling exports and plummeting oil prices, rather than fewer imports.
At 2 pm, the Treasury will release its Monthly Budget Statement for April, which is expected to show a deficit of $28 billion, compared to the April 2008 surplus of $159 billion. As of March, the annual deficit is already twice as big as it was this time last year.
Tuesday also sees two weekly retail sales reports: the ICSC report at 7:45 am, and the Redbook report at 8:55 am.
Atlanta Fed President Dennis Lockhart speaks at 8:20 am.
The MBA will release its weekly Mortgage Application Index at 7 am. In last week’s index, loan applications were up 2.0%.
The big event on Wednesday is April’s Retail Sales report at 8:30 am, which analysts believe advanced by 0.1% in April. Expectations diverge from -0.6% to +0.6%. Markets often look at the figure that excludes auto sales, which can fluctuate widely; it is expected to increase 0.3%.
Also at 8:30 is the Import/Export prices index; at 10 am Business Inventories is released.
At 8:30 am, the Producer Price Index is set to drop 0.1% in April in both the headline and core indexes.
At the same time, the weekly Jobless Claims report comes out. Last week, initial claims were 35,000 lower than expectations at 601,000. Initial claims have been above the 600k mark for 14 straight weeks.
In terms of data, Friday is the busiest day of the week, with two reports on output, a key inflation index, and the first look at consumer sentiment in May.
At 8:30 am, the Consumer Price Index is expected to remain unchanged following a 0.1% cut in March. Excluding food and energy, analysts look for a 0.1% increase, a slower pace of advance than the 0.2% increase in March.
Also at 8:30, the first look at the month’s manufacturing conditions will be published in the New York Fed’s Empire State survey. It is supposed to contract at a slightly slower pace than in April.
Fifteen minutes before markets open, Industrial Production is expected to show a 0.6% contraction in April, following a 1.5% slowdown in each of the last two months.
The final release of the week is Consumer Sentiment at 9:55 am. Published by Reuters and the University of Michigan, the preliminary report is the first glance at sentiment each month. With evidence that the housing market is stabilizing and retail sales are resuming growth, analysts are looking for a slight advance to 67.0 in May, up from 65.1 last month.