Weekly Economic Indicators

The full announcement schedule for the week of November 14th  is as follows:

  • Monday:  None
  • Tuesday:  Producer Price Index, Retail Sales, Empire State Mfg Survey, and Business Inventories
  • Wednesday: Consumer Price Index, Treasury International Capital, Industrial Production, and Housing Market Index    
  • Thursday:  Housing Starts, Initial Jobless Claims, and Philadelphia Fed Survey
  • Friday:  Leading Indicators

Click this link for the full economic calendar for the week.

Gordon Charlop Ph.D. Managing Director, Rosenblatt Securities Inc. and frequent commentator on CNBC predicts that the market will continue on the upside for the remainder of the year. While good for most investors, this may be painful for hedge fund managers as they get paid to beat the S&P 500 Index and many are lagging/underperforming so far. The practice of buying on dips will make it impossible to play catch up, especially as they are sitting on the sidelines with cash while the markets continue to appreciate. Charlop calls this situation a “performance squeeze,” as the market keeps getting away from the fund managers and they are forced to buy at higher prices and are further pressed for returns. Because funds want to avoid redemptions and unhappy customers, the performance squeeze will likely keep the markets supported on the upside for the remainder of the year. This will not hold for the beginning of 2012. He says the fundamentals aren’t there and the typical “January Effect”, which happens when people bring new money into the market from year-end bonuses, doesn’t seem to be setting up.  

Retail Sales and Weather: Charlop expects top tier retailers like Tiffany’s, Nordstrom’s, and Saks to do better leading into and through the holiday season; middle tier retailers including Target, Walmart, Kohl’s, Sears, and Macy’s will also show competitive strength. Meanwhile, lower end retailers like Family Dollar and 99 Cents Only stores are expected to continue to show the same strength, as they have shown all year long, assuming consumers remain flexible with disposable income. The unknown factor is pricing of crude oil which can impact all retailers' bottom lines. The big surprise will come from housing retailers like Home Depot and Lowes  who will benefit from the recent northeast snow storm. Charlop says the devastating impact of the storm hasn’t been fully realized and rebuilding efforts may actually boost GDP.

Empire State Manufacturing Survey, Philadelphia Fed Survey, and the Housing Market: There will be no double dip recession says Charlop, citing inconclusive New York and Philadelphia Fed data. He is watching consumer spending and consumer confidence along with retail sales and higher gas prices as the year progresses. While the jobs data has stabilized a little, housing data is still weak. Charlop expects banks to work through excess inventory; mortgage delinquencies will level off in the next 18 to 24 months. If the unemployment rate continues to decline and house prices drop, home sales will increase and the market will pick up again. Charlop believes the bigger worry is credit card delinquencies, which continue to be a problem for US consumers. How the federal super committee deals with this issue will be key.

Fed Speaker Circuit: There are a number of Fed speakers on the circuit including, James Bullard, Charles Evans, John Williams, Jeffery Lacker, Richard Fisher, Eric Rosengren, and Sandra Pianalto. It is unclear whether they will give any indications about additional stimulus and  we will have to wait and see. Charlop believes Quantitative Easing 3 (“QE3”) is coming, as there have been a number of dissenting Fed members on major votes, creating a prolonged lack of unanimity. He pointed out that Italy’s bonds have breached the 7% crisis level for interest rates with soaring debt, and this represents a harbinger of what is coming for the US. Italy is not maintaining a payment schedule and it’s impossible for a country to remain viable with such high levels of debt. Charlop believes the US has a debt crisis at the federal, state, and municipal levels. As much as Fed Chairman, Ben Bernanke had hoped for Washington to do something on the fiscal side, it is becoming more likely that he will have to step in and provide more stimulus in the form of QE3.