Weekly Economic Indicators with Art Cashin

The economic release schedule for the week of February 13th  is as follows:

  • Monday:  None
  • Tuesday:  NFIB Small Business Optimism Index, Retail Sales, Import and Export Prices, and Business Inventories
  • Wednesday:  Empire State Mfg Survey, Treasury International Capital, Industrial Production, Housing Market Index, and FOMC Minutes     
  • Thursday:  Housing Starts, Initial Jobless Claims, Producer Price Index, Philadelphia Fed Survey, and Fed Balance Sheet 
  • Friday:  Consumer Price Index and Leading Indicators 

Click this link for a more comprehensive economic calendar for the week:  http://www.bloomberg.com/markets/economic-calendar/

Economic Indicators - What to Watch

There's a slew of economic data this week. Arthur Cashin, Managing Director of Floor Operations at UBS Financial Services and frequent CNBC commentator is focused on the Overall Market, Earnings Season, NFIB Small Business Optimism Index, Empire State Mfg Survey, Philadelphia Fed Survey, Housing Market Index, Housing Starts, Initial Jobless Claims, and a Number of Federal Reserve Bank (“Fed”) speakers on the circuit.  

Overall Market

Cashin said he is concerned about both the rise in US equity markets and the elevation in world stock markets.  Greece is a good example, sporting 15% gains for the year.  He cites Fed Chairman Ben Bernanke and the central bank’s decision to keep interest rates extremely low for the next few years as the impetus for people getting into equities.  He pointed out that Larry Fink CEO of Blackrock Inc. said people should be in stocks, as the Fed is keeping bond yields so low, so it doesn’t pay to have any funds invested in fixed income.  Cashin sees it more as investors being forced into the equity markets because CDs, fixed income, and treasuries are paying such low yields, and it no longer pays to place money in these traditional instruments.  Cashin said it’s a psychology of:  “hold your nose and buy them anyway”.  Cashin added that seasonal factors tell us we are due for a correction in the markets, but he points out that there is a huge short position on the Euro, which is adding to the upward push in the US stock market. 

Earnings Season

Cashin sees earnings season so far as being mediocre, the number of companies beating estimates are down compared with the previous 5 quarters.  Companies are being forced to cut direct expenses, including employees.  They are operating at a lean level and have been pretty efficient thus far, but the pressure on profit margins will have a significant impact if companies ultimately can’t deliver.  Companies continue to cut costs to meet analyst expectations, but going forward they will face real pressure to live up to expectations since they can’t cut expenses further. 

NFIB Small Business Optimism Index, NY Fed, and Philadelphia Fed

Cashin says he feels the NFIB Small Business Optimism Index has not been “buying into” the recovery thus far.  Small business is the engine that drives the economy, so it will be critical to watch the index as an indicator of job creation across the country.   On the NY Fed and Philadelphia Fed, Cashin will be looking to see if both surveys confirm the optimistic jobs data we got from the Labor Department last month. Solid revisions in the jobs data will add credibility to the payroll numbers. 

Housing Data (Housing Starts, Housing Market Index)

Cashin feels it’s tough to figure out if the housing market has bottomed.  He said some proposals to resolve the housing industry problem are very creative. For example, lenders are settling for short sales instead of foreclosures.  He compares the housing market with an individual “having four bricks on his chest and struggling to breathe”.  We have to get through a lot of inventory, and some of the programs designed to revive the industry might be hampering it.  

Initial Jobless Claims Data and Fed Speakers on the Circuit

He said the jobs data will be carefully watched, next to the housing and payroll numbers.  He believes we could see an uptick in the initial jobless claims data this week because some of the other economic data gives  kind of a hollow look.  He added, Europe is looking down and growth seems to be slowing.  We have received some awful economic data out of Germany latelyand the Greek bailout looks to be unraveling.  This week a number of Fed speakers will be on the circuit, including Philadelphia Fed President Charles Plosser, Dallas Fed President Richard Fisher, and Fed Chairman Ben Bernanke.  Cashin thinks Fed watchers will be looking to see if the central bank gives any hint about a possible QE3 and how much further along the agency is with their tone, or how adamant they are that the economy does not need further quantitative easing.