Weekly Economic Indicators: Waiting For the FOMC

WASHINGTON, DC - NOVEMBER 09:  Federal Reserve...

WASHINGTON, DC - NOVEMBER 09: Federal Reserve Chairman Ben Bernanke (Image credit: Getty Images via @daylife)

The economic release schedule for the week of October 22nd  is as follows:

  • Monday:  None
  • Tuesday:  FOMC Meeting Begins and Richmond Fed Manufacturing Index
  • Wednesday:  MBA Purchase Applications, PMI Manufacturing Index Flash, New Home Sales, FHFA House Price Index, and FOMC Meeting Announcement
  • Thursday: Durable Goods Orders, Weekly Jobless Claims, Chicago Fed National Activity Index, Pending Home Sales Index, Kansas City Fed Manufacturing Index, and Fed Balance Sheet
  • Friday:  GDP and Consumer Sentiment

This week I spoke with Arthur Cashin, Managing Director of Floor Operations at UBS Financial Services, and frequent CNBC commentator, about what he will be watching next week.

Overall Market

Cashin predicts the overall market is heading higher for the remainder of the year, but could hit a bump. He expects 3rd quarter earnings season will disappoint, but not enough to drag down the equity markets. The bulls are making the case and declaring that the bull market has resumed and the sell-off is done for now. He further predicts money managers will have to participate in this market soon, as the end of October is the end of the year for them, but he is concerned about the level of uncertainty businesses and money managers are facing, including taxes and regulation and the overall  economy. Cashin does not believe the euro zone sovereign debt crisis will impact the markets much, as it is mostly factored into the prices already. He thinks that if Spain’s Prime Minister, Mariano Rajoy commits to a request for a bailout package from the European Union, it will be political suicide for him. But, added, “the end of the world has been postponed for a now.”

FOMC Meeting

Cashin will be watching to see how far the Federal Reserve and its FOMC members go with the rhetoric. The Fed has been frustrated with the economy, as it has not been able to turn it around. In NY Fed President, William Dudley’s, last speech he echoed some of critic’s concerns that the central bank has used a lot of tools and hasn’t gotten the desired results. There are some signs of mortgage refinancing, but not enough, and gold and other assets are still below the level when the Federal Reserve announced QE3.

Housing Data

This week there are a few housing related reports on the calendar, including new home sales, FHFA house price index, and pending home sales index. Cashin acknowledges that some of the housing data reported lately has shown improvements, especially housing starts, and we are beginning to see signs of refinancing. There are also indications that sales are starting to show upbeat activity in the hardest hit areas with the most foreclosure activity, like Las Vegas, Florida, and Phoenix. Some economists feel the housing market has finally turned the corner. Referring to the latest positive numbers in the housing market, Cashin said “ the body is moving, but we don’t know if its strong enough to get up and walk.”

3rd Quarter GDP Data

Cashin is forecasting that the first reading for 3rd quarter GDP will be under 2%, although the last series of numbers, including consumer confidence and retail sales, have been upbeat. He said it will be important to see how the latest round of economic data impacts the growth figures for the 3rd quarter. Cashin called the data suspect, but upbeat.

Weekly Jobless Claims

In response to the significant drop in jobless claims on October 11, Cashin is looking forward to this week’s claims data.  He said sentiment on the Street is the claims data was suspicious. Some believe one of the states did not report completely, and thus this week’s claims data will be very important.

Buzz on the Trading Floor

Cashin said the feeling from the trading floor lately is the markets tend to only go one way, up or down. He went on to say, “if there is a rally, sellers walk off the field, and if there is selling, buyers walk off the field.” Cashin added, there used to be some give and take in the major indices, but lately it has been very one sided.

Arthur’s Gripe

Cashin is concerned that market participants continue to ignore geopolitical risk around the world. There are geopolitical hot spots throughout the globe that all investors should be aware of. For example, Turkey and Syria could be on the verge of a regional war, as the opposition tries to overthrow the al-Assad government. Israel and Iran are at odds over Iran’s nuclear program, and Iran is threatening to block the straits of Hormuz again. There are also reports of violence and disruption in the streets of Egypt. Cashin thinks the markets have largely ignored these events which could cause a lot of volatility down the road.