Economic Indicators Review

What to Watch this Week

The EU rescue package for Spain and Italy on Monday and Tuesday, the NFIB Small Business Optimism Index, the Fed’s FOMC Meeting Announcement, the 3, 10 & 30 year Treasury auctions and jobless claims data will be the most watched economic indicators this week, according to UBS Financial Services Managing Director of Floor Operations Arthur Cashin.

The Fed’s FOMC Announcement on Tuesday will be watched to see if it provides clues to the possibility of QE2½ or to the tone for the annual meeting in Jackson Hole. Given the battle between President Obama and Congress over the debt deal, there is a lot of speculation over whether the Fed can, or should, provide the necessary jump start for the economy.  The Treasury auctions will be crucial since they will be the first bond auctions since the debt deal.  With the Fed not buying bonds anymore (now that QE2 is done), demand in general for Treasuries, and the Chinese appetite in particular, will be in focus. The National Federation of Independent Business (or NFIB) report is a summary of the current status of small business in the country with monthly surveys from its membership.  The Index is important since it has been dead-on as a sentiment indicator over the last few months. Lastly, the weekly jobless claims numbers continue to be closely followed for indications of a job recovery. Each of these indicators has the potential to impact trading and the market overall.

Other economic indicators due out this week cover manufacturing, real estate, the cost of living, consumer sentiment and the broader market. The announcement schedule for the week of August 8th looks like the following:

  • Monday:  None
  • Tuesday:  Productivity and Cost and FOMC Meeting Announcement
  • Wednesday:  Wholesale Inventories
  • Thursday:  International Trade and Initial Jobless Claims
  • Friday:  Retail Sales, Consumer Sentiment, and Business Inventories

Highlights from the week of August 1 thru 5:

Last week, economic indicators being reported were overshadowed by concerns about whether a budget/debt deal would be reached in Washington. Manufacturing activity for July came in well below expectation, new factory orders were disappointing as was consumer spending.  Wednesday’s ADP Employer Services reported some positive news about the private sector adding more jobs than last month, and coming in above expectations. However, on Thursday, the DJIA plummeted over 500 points and the S&P 500 fell over 60 points on continued global economic fears over the EU debt crisis. The ECB began a six-month bond-buying program in order to ease concerns. 

On Friday the market initially improved, rebounding from Thursday’s meltdown after the non-farm payroll numbers came in higher than estimated for July. The unemployment rate decreased slightly to 9.1% from 9.2%, led by more hiring in the healthcare and retail sectors.  However, the market then rolled over and sold off sharply on fears in Europe.  By midday, the market  turned positive again after an announcement of a rescue package for Spain and Italy.  Towards the end of the day, the market weakened on reluctance to hold for the weekend. 

Click here for the full economic calendar for the week.