Weekly Economic Indicators: Banking earnings and Housing Ties

Construction Crane

Construction Crane (Photo credit: JMazzolaa)

The schedule for the week of April 15th includes:

  • Monday:  Empire State Manufacturing Survey, Treasury International Capital, and Housing Market Index
  • Tuesday:  ICSC-Goldman Store Sales, Consumer Price Index, Housing Starts, and Industrial Production
  • Wednesday:  MBA Purchase Applications and Fed’s Beige Book
  • Thursday:  Jobless Claims, Philadelphia Fed Survey, and Fed Balance Sheet
  • Friday:  None

I spoke with Benedict Willis III, Managing Director of Albert Fried & Company, LLC., and frequent commentator on Bloomberg, CNBC, and FOX Business, about the economic calendar for next week.  Willis will be focused on the overall market, 1st quarter earnings, housing data, view from the trading floor, and his final word.

Willis expects the equity markets to continue to go higher; the world economy is improving, and money that has been hiding on the sidelines is moving into equities. For now, equities will go higher, as there is no alternative, despite several Fed members thinking about scaling back the central bank’s asset purchase program by the end of 2013. He added, the dips in the market we have been having are few and far in between, and are less impactful. However, he advised for investors to pay attention to the economic data from China, as the recent import and export data was mixed. The import data was good news for the US, but unless the Chinese export durable goods, they can’t import products from the rest of the world, including the US. He also cautioned to keep a watchful eye on the European Central Bank, as the formula implemented in the Cyprus banking system could become the template for the rest of the peripheral countries.

First Quarter Earnings

Companies have greatly diminished expectations for 1st quarter earnings; it will be interesting to see how the numbers come out. Thompson Reuters is forecasting the quarter’s earnings to be about 1.5% higher. However, this is lower than the 4.3% expected at the beginning of the year. Alcoa’s earnings, which have traditionally not been a good indicator of how earnings season will progress, were better than expected; although the revenue numbers were slightly below expectations. Willis said, “If the market continues to interpret the environment with a ‘glass half full’ outlook, then equities will rise.”

Housing Market

According to Willis, sentiment is positive. The market is measuring the housing data against a very low benchmark. The data is a net positive, until the next release, which could be uneven. This week, there a few pieces of housing data such as the housing market index, housing starts, and MBA purchase applications. Earnings from the banking sector will provide more insights into the health of the housing market. JPMorgan Chase and Well Fargo opened their books late last week and provided evidence that the housing sector is on the mend, despite a record number of sales resulting from foreclosures and short sales.

View from the Trading Floor

“The anticipated correction is becoming the next Black Swan; you get a look at it in the beginning of the trading day and then it disappears,” Willis said. Most traditional traders believe we will get a 5% correction, but every time it seems like it will happen, we get a rally and the pull back is only about 1% and then disappears.

Final Word

Very few investors are aware of the risk inherited from the euro zone, particularly in Italy and Spain. Jeroen Dijsselbloem, president of the Board of Governors of the European Stability Mechanism (ESM) continues to down play it. As previously noted, the template implemented in Cyprus is troubling as it could become the model for the rest of the EU members which could spook US equity markets - the credit default markets and CDs’s are certainly reading it that way.

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