Weekly Economic Indicators: Looking to the Fed

The schedule for the week of July 22nd  includes:

  • Monday:  Chicago Fed National Activity Index, Existing Home Sales, 3-Month and 6-Month Bill Auction
  • Tuesday:  ICSC-Goldman Store Sales, FHFA House Price Index, Richmond Fed Manufacturing Index, and 2-Yr Note Auction
  • Wednesday:  MBA Purchase Applications, PMI Manufacturing Index Flash, New Home Sales, and 5-Yr Note Auction
  • Thursday:  Durable Goods Orders, Weekly Jobless Claims, Kansas City Fed Manufacturing Index, 7-Yr Note Auction, and Fed Balance Sheet
  • Friday:  Consumer Sentiment

I spoke with Jonathan Corpina, Senior Managing Partner of Meridian Equity Partners and frequent CNBC commentator, on what he feels will be impactful to the market next week. Corpina will be watching a number of data points, including the overall market, consumer sentiment, weekly jobless claims, housing data and second quarter earnings.

Overall Market

The equity markets will be driven by the Federal Reserve (“Fed”) sentiments and actions, second quarter earnings and macro data into the fall. After September, Corpina predicts it will be all about macro data as we are going back to the basics and the fundamentals of investing. Tapering will done with by the fall and he is optimistic the individual investor will be persuaded to return to the equity markets. He hopes by going back to the essentials of investing, confidence in financial markets will be boosted and thus precipitate stabilization. Interest rates will be going higher, as they should, and this will benefit all investors in the long term.

Consumer Sentiment and Jobless Claims

We are beginning to see re-entry into the equity markets in light of an improving economy and that fact that consumers are better budgeting their money. The US consumer is enormously important to the equity markets and has a very significant impact on the overall economy. Corpina said recurring jobless claims will be in focus this coming week, as the numbers were not that impressive in the last report from the Labor Department.

Housing Market

According to Corpina, the job market has gotten better and home buyers’ confidence in the housing market has improved. The housing market is on the mend and even though interest rates are predicted to go higher, banks are relaxing restrictions on loans. Loan applications are still rigorous, but the outcome has gotten better for prospective buyers which will aid the housing sector. Renters have been renting for a while and this is the opportunity for them to buy. He is afraid if home buyers don’t take advantage of the opportunity now, it will not be there next year.

Earnings Season

Corpina is expecting second quarter earnings to come in line with expectations. Thus far, 103 or about 21% of the S&P 500 companies have reported earnings and 54% have beaten expectations on revenues, while 72% have topped earnings estimates. Despite lower expectations prior to Q2 earnings season, Corpina believes investors will focus on the fundamentals. Bottom line numbers will be scrutinized and top line numbers will be less in focus. This being the weaker of the four quarters traditionally, it will give some momentum going towards the end of the year.

Final Word

According to Corpina, investors’ attention has been occupied by the Fed and earnings lately, but he cautioned investors to keep a watchful eye on Europe and China, as their problems have not dissipated.