Weekly Economic Indicators: Shoppers' Delight

Black Friday line

Black Friday line (Photo credit: tshein)

The economic release schedule for the week of November 26th is as follows:

  • Monday:  Chicago Fed National Activity Index and Dallas Fed Manufacturing Survey
  • Tuesday:  Durable Goods Orders, S&P Case Shiller HPI, Consumer Confidence, FHFA House Price Index, Richmond Fed Manufacturing Index, and State Street Investor Confidence Index
  • Wednesday:  MBA Purchase Applications, New Home Sales, Federal Reserve Beige Book, and Sandra Pianalto speaks
  • Thursday: Chain Store Sales, GDP, Jobless Claims, Pending Home Sales Index, Kansas City Fed Manufacturing Index, and Fed Balance Sheet
  • Friday:  Personal Income and Outlays and Chicago PMI

I spoke with Arthur Cashin, Managing Director of Floor Operations at UBS Financial Services, and frequent CNBC commentator, about what he will be watching. Cashin is focused on the overall market, weekly jobless claims, a second revision of 3rd quarter GDP, the retail shopping season, housing data, consumer confidence, and the Fed’s Beige Book,

Overall Market

Cashin expects the equity markets to trend higher for the remainder of the year, if Washington can agree on the appropriate balance of taxes and spending cuts, to avoid the fiscal cliff. Cashin says people are hopeful on the fiscal cliff, but are not assured a deal will get done, and thus the financial markets remain on edge. Talks are expected to resume after Congress returns from recess, and President Obama gets back from his Asian trip. In the mean time, political leaders are staying away from the cameras to avoid saying something that might jeopardize the delicate negotiations. Cashin believes any deals agreed upon by both sides will be received positively by the stock market. But, even with the “Kumbaya” moment, when Nancy Pelosi said they are working together and looking for a deal by Christmas, preliminary discussions indicate the deal still lacks detail. Greece also remains a driver of the markets and if the country is able to get its next tranche of bailout funds, it could be another catalyst for a rally.

Weekly Jobless Claims & GDP

Cashin is forecasting the claims numbers to stay high, and remain above the 400,000 range, as we come out of Hurricane Sandy and the storm related impact. He is afraid quite a few employers were unable to open their doors to get workers in to do their jobs, and thus the claims numbers will rise. He feels after the superstorm many employers were saying to their employees “I have no power, so go home, we don’t need you today.” A second reading on 3rd quarter GDP, which will be out on Thursday, is not expected to differ that much from the previous reading, as growth has been timid. Q4 GDP might be a surprise to the upside, however, as construction activity picks up from the rebuilding after the storm.

Black Friday and the Retail Shopping Season

Cashin will be looking at ICSC-Goldman store sales and chain store sales data after Black Friday officially kicks off the holiday shopping season. He warns the Black Friday data can be tricky as retailers look to create a rosy picture to draw customers into stores. Retailers don’t want to create a gloom or doom perception, as they won’t be able to attract customers into their establishments, and so the data could be misleading. Early indications suggest shipments will significantly increase over last year’s, and United Parcel Service is forecasting it will require another 55,000 temporary workers for the holiday season.

Housing Data

On the docket this week, S&P Case-Shiller HPI, FHFA house price index, new home sales, and MBA purchase applications will be released. The trend has been showing the housing market is on the mend and may finally have bottomed out. However, Cashin questions whether the data is reflective of what we are seeing in neighborhoods and cities in the country. The feeling is, as survivors of Hurricane Sandy receive their checks from their insurance companies and FEMA, they will need some form of replacement housing, and thus real estate activity is expected to pick up. He does not expect insurers to take a hit from the storm, but reinsurers may be on the hook, as they take on the risk for insurers.

Consumer Confidence and the Fed’s Beige Book

Cashin will be watching to see if the figures from consumer sentiment show an upbeat mood, as the election polls indicated, after both candidates concluded their campaigns. The Federal Reserve’s Beige Book, which is the working paper for the FOMC, will give a clearer picture of the business activity throughout the country. Operation Twist expires at the end of the year, and the FOMC will be looking to implement another around of asset purchases, although a few nonvoting members like Dallas Fed President, Richard Fisher, do not support further monetary easing.  Fisher is more focused on congress to act on the fiscal side, and the Federal Reserve to do less from the monetary side.

View From the Trading Floor

Cashin is concerned that profit margins continue to retract from record levels, which may make further earnings comparisons difficult. Third quarter earnings are at the tail end, and most companies have either met, or came in below expectations, although the better managed companies have managed to beat. According to Thompson Reuters, only about 40% of S&P 500 companies topped revenue expectations this quarter.