Weekly Economic Indicators: End of Stimulus?

The schedule for the week of July 15th includes:

  • Monday:  Retail Sales, Empire State Manufacturing Survey, and Business Inventories
  • Tuesday:  ICSC-Goldman Store Sales, Consumer Price Index, Treasury International Capital, Industrial Production, Housing Market Index, and Esther George Speaks
  • Wednesday:  MBA Purchase Applications, Housing Starts, Beige Book, and Federal Reserve Chairman, Ben Bernanke Speaks
  • Thursday:  Weekly Jobless Claims, Philadelphia Fed Survey, Leading Indicators, 10-Yr TIPS Auction, Federal Reserve (“Fed”) Balance Sheet, and Fed Chairman Ben Bernanke Speaks
  • 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, second quarter earnings, housing data, Empire state manufacturing data, and the Philadelphia Fed survey.

The latesy Fed minutes revealed that more than half of the voting members would prefer to end its stimulus program by the end of the year. According to Willis, this should signal a buying opportunity for investors and bondholders should also assess their positions. He expects the equity market will go higher towards the end of the year, but if for some reason there is a pullback, it will be a buying opportunity. He is surprised that after the Fed’s minutes were released that there wasn’t initially more selling pressure. Willis believes this makes the FOMC’s next meeting in August much more important. He thinks the central bank’s September meeting will be when the agency will decide to taper its quantitative easing program.

Second Quarter Earnings

Willis said historically the second quarter is the lowest quarter and with expectations already lowered, he is not forecasting a good earnings season. Fed policy has had a direct impact on companies and their earnings. He is forecasting a dramatic rise in interest rates, which will be a positive for the financial sector. He added that US companies have successfully beaten estimates quarter over quarter, which suggests stocks are fairly priced or even cheap. He feels investors should still “buy the rumor and sell the news," particularly with the big bellwether companies.

Housing Data

The housing data continues to show improvements. Anecdotally, the data is indicating that the housing market is getting better according to Willis. However, mortgage applications are indicating that higher interest rates are already starting to take effect and he believes the housing data will be very closely watched. This week, several housing indicators will be on tap, including the housing market index, housing starts, and MBA purchase applications.

Empire State Manufacturing and Philadelphia Fed Survey

The reaction to these numbers will be keenly watched as these two areas of the country are very important to the Fed’s decision making to end QE. The regional data reported by these two banks, the New York Fed and the Philadelphia Fed will provide insights as to whether Ben Bernanke and company are on the right track.