Markets are looking optimistic this morning ahead of an insanely busy week. Monday begins slowly with no major macroeconomic data on the schedule, but later in the week are key industry surveys, the monthly employment numbers, critical spending figures, plus housing prices and a variety of speeches from the Federal Reserve Board.

“The key data out this week on home prices, consumer confidence, spending and production are expected to show the recovery is gaining traction, and job losses are slowing,” said Jennifer Lee, economist at BMO Capital Markets. “This might shore up investor confidence after weaker-than-expected reports last week on home sales and factory orders raised doubts about the recovery’s durability.”

Key Releases This Week:

Monday:

Treasury Auctions:

1:00 ― 3-Month Bills

1:00 ― 6-Month Bills

Tuesday:

9:00 ― The S&P Case-Shiller Home Price Index is the most closely watched measure of national home prices. Last week the FHFA released its results and showed prices moving up 0.3% in the same period, but the Case-Shiller measure is more comprehensive, largely because it captures homes purchased using subprime mortgages and other alternatives.

“The first-time home-buyer tax credit certainly helped demand for homes ― and values ― but so did the calendar; home sales typically improve in late spring and early summer as families try to finish moving before school begins,” said Mark Lieberman, senior economist at Fox Business News. 

9:50 ― Richard Fisher, President of the Dallas Federal Reserve, delivers a economic update to the Texas Christian University Business Network of Dallas.

10:00 ― The Conference Board’s measure of Consumer Confidence should be in line with the advance seen in last week’s sentiment measure from the University of Michigan. Last month it rose 7 points to 54.1; this month a modest gain to 57.0 is expected by markets. A surprise could be in store due to rising unemployment, but the continued advance in stock markets ― last week’s 2.2% dip excluded ― should provide a sense of optimism.

7:00 ― Well after the markets close, Charles Plosser, President of the Philadelphia Fed, will give a speech on the Fed's role in the recovery process at the Lehigh Valley Economic Outlook in Easton, Pennsylvania. 

Treasury Auctions:

1:00 ― 4-Week Bills

8:15 ― Three weeks of improvement in initial jobless claims is making the case for fewer lay-offs in September, as can be seen in the forecasts for this month’s ADP Private Employment Survey. In August, 260,000 jobs disappeared in the ADP results, whereas this month analysts expect only 195,000 jobs to vanish. Even the range is narrower than usual, from -133k to -260k. 

The ADP results don’t factor in the growth from government jobs, so Friday’s Nonfarm Payrolls report should show even more moderation.

“Our forecasts for a 170k decline in nonfarm payrolls translates into a 260k drop in ADP employment, based on recent differences between the two series,” said forecasters from Nomura.

8:30 ― A second revision to the second quarter’s Gross Domestic Product report is expected to bump the figure down a notch to -1.2% from -1.0%. Comparing to the -6.2% drawback in Q1, that’s still a major improvement.

9:45 ― The Chicago Business Barometer is often considered the most important forecasting tool for the nationwide ISM survey of manufacturing conditions, even though it measures business in general, including the services industry. In August the survey improved to 50.0, meaning business was flat but on the threshold of growth. This month a score of 52.0 is expected, but an upward surprise wouldn’t be too unexpected as several regional surveys have already bested forecasts this month.

10:30 ― Dennis Lockhart, President of the Atlanta Fed, gives a talk on the economic outlook to the University of South Alabama in Mobile.

Thursday:

8:30 ― The Personal Income & Outlays report is expected to show that wages remain stagnant, but despite this, spending should have increased substantially, in large part because of the success of the cash-f0r-clunkers program. Median estimates look for wages and core prices to both inch up 0.1%, while total consumer spending should jump 1.1%. 

“July marked the return to the true underlying personal income figures, devoid of the huge government transfer payments that skewed the May and June data.  In July, personal income was flat and we expect only a +0.1 percent gain in August. 

“Even though job loss is slowing, the work week remains near its historical low and wages remain under severe pressure,” said Ellen Zentner, senior macroeconomist at BTMU. She expects consumption to beat the consensus with a 1.3% gain, which would be “the largest monthly jump since the 0% financing incentive that caused vehicle sales to spike in October 2001.”

8:30 ― Jobless Claims have been moderating for three consecutive weeks but analysts aren’t yet calling the improvement a sustainable trend. There are expected to be 537k new claims for the week ending Sept. 26, up from 530k in the week before. Even so, data in September is already pointing to the lowest drop in payrolls since July 2008.

10:00 ― Forecasters expect the closely-watched ISM Manufacturing Survey to see its best results in three years this month. In August it hit growth mode for the first time since the start of the recession, beating expectations with a score of 52.9 (50+ indicates expansion.) Regional surveys points to modest improvement to 53.5 in September.

Analysts from IHS Global Insight said it will “creep higher,” but outsized gains seen in July and August are unlikely to be repeated. “The index should remain solidly above the neutral 50 reading, at 53.5, but just not add much to August's 52.9 reading,” they added.

10:00 ― As far as markets go, the Construction Spending report will take a backseat to the ISM survey, but for those in real estate the index provides a broad picture of new projects in the residential, non-residential, and public sectors. Unfortunately, that picture isn’t yet pretty. Spending should decline by 0.1% in August following a 0.2% decrease in July. Economists looks for single-family home construction to rise, but commercial and nonresidential to decline.

10:00 ― After the surprisingly weak existing home sales report last week (the headline fell 2.7%), analysts will be looking closely at the Pending Home Sales Index for August. The report looks at contracts that have been signed but not finalized, thereby acting as a leading indicator of actual sales in the following month or two.

5:30 ― Sandra Pianalto, President of the Atlanta Fed, speaks to Market News International seminar in New York.

Friday:

8:30 ― The economy may be in technical recovery, but the average worker still has plenty of reason to believe that it will feel like a recession for months to come. In September’s Employment Situation report, the unemployment rate is expected to climb one-tenth to a fresh 26-year high of 9.8%, while nonfarm payrolls are set to drop 170,000. The latter drop is an improvement from the -216k print in August, but the economy is still a long way off from adding jobs on a month to month basis. 

“While the rate of layoffs has slowed dramatically, hiring remains uninspiring, flagging another month or two of net job losses and an eventual 10% handle on the jobless rate,” said Jennifer Lee from BMO. “Rampant joblessness, still-high household debt and the need to replenish savings will restrain consumer spending through the turn of the year.”

10:00 ― With markets still digesting the latest employment numbers, the Factory Orders report is bound to be ignored unless there are major revisions to new orders for durable goods. In July factory orders jumped 1.3% ― the fastest monthly pace in in 13 months ― and stabilization looks likely to continue with economists expecting a +1.0% print in August.
 


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