Sunday, August 06, 2006

Weekly look ahead

The big news of the week in the media will no doubt be the Federal Reserve interest rate decision on Tuesday. There is plenty of other data coming out this week and a lot of earnings being reported.

Monday, August 7th

  • Consumer Credit totals for June report at 3pm EST. Market expectation is for 4-4.5 Billion in credit growth. The average has been about $5.3B per month for 2006. Higher numbers here will indicate increasing consumer spending and potentially improving retail sales that would boost earnings and the market, but would also suggest increasing inflation forces. Even at $5B I wouldn’t worry about defaults though, I keep a close eye on this number in comparison to hourly wage and work week numbers and the earnings of consumers is strong enough to support higher credit usage than we’ve been seeing.
  • Earnings reports: almost 100 companies report today.
Tuesday, August 8th

  • Preliminary Q2 Productivity report is released at 8:30am EST. Previous productivity growth was very strong (3.7% in Q1 versus a historical average of maybe 5% for a whole year). Economists are predicting tepid growth of 0.9% to 1.1%, although it’s not clear to me what those estimates are based on. I hope this number is higher, as that would be great for the economy. This is a very important number for the long run, but it will no doubt be lost in the news alongside today’s other big report…
  • Federal Open Market Committee policy statement releases at 2:15PM EST. This is the meeting where most of the market expects the Fed to finally stop raising interest rates. If rates go up the market will probably drop sharply. If rates stay the same the market could actually break either direction depending on the fed statement and whether people are more worried about slowing economic growth or interest rates and inflation.
  • Earnings reports: About 150 companies report today
Wednesday, August 9th

  • Wholesale Inventories for June report at 10am EST. Last month this number was up 0.8%. Expectations are for 0.6% this month. When this number rises more sharply (faster than sales growth) it indicates consumer channels are getting stuffed and a slowdown in the retail business. If Monday’s credit growth is high and this number is low we will know (ahead of most people) that retail supplies are being voraciously purchased and strong retailer numbers are ahead for next quarter (then manufacturer numbers after that).
  • Weekly Crude inventories reports at 10:30am EST.
  • Earnings reports: About 25 companies report today and things wind down.
Thursday, August 10th

  • Initial jobless claims for the week report at 8:30am EST. Last week surprised with increased unemployment but jobless claims have not yet been rising above their steady level. High jobless claims may turn the market negative based on recessionary fears, while low claims will probably hurt the market based on inflation concerns. I doubt anything good will come of this report unless it stays in line with the 300,000 expected range.
  • Trade Balance for June reports at 8:30am EST. Expectation is for -$64.8 B or so (compared with previous month of -$63.8 B). While some people see a negative trade balance as a problem, I see it as the rest of the world selling us underpriced goods. We gain by the cheaper goods and they slowly raise their standard of living, which is good all around. This one has minimal actual economic effect, mostly making for dramatic protectionist articles instead.
  • Treasury Budget for July reports at 2pm. The previous monthly report was a deficit of $53.4B, this month is expected to be a deficit of “only” $44B due to higher tax revenue. It is interesting to note that the higher tax revenue seems to be coming from income shifts to the higher wage earners – who pay higher taxes. Thus the tax revenue gains have been faster than the actual income gains because the average tax rate is effectively increasing.
  • Earnings reports: only about 10 today
Friday, August 11th

  • Export prices and Import Prices for July reports come out at 8:30am ET. Export prices are expected to rise 0.6% and import prices by 0.4%. These numbers are good leading indicators to watch for inflation since so many goods are made overseas now.
  • Retail Sales and Retail sales excluding autos for July reports come out at 8:30am EST. This is where you break out the inventory numbers from Wednesday and compare sales versus inventory action. The tricky part is that this is Jul sales and the Wed numbers are for June inventories. Nonetheless, healthy retail profits are based on sales growth that equals or exceeds inventory growth. One of the first signs of a retail slowdown is when inventories start to build up faster than sales.
  • Business inventories for June report at 10am EST. Like Wednesday’s wholesale inventories these numbers are a month behind the sales numbers, but a sheet of paper with inventory and sales numbers jotted on it gives you an excellent view into the retail economy.
  • Earnings reports: almost none today. This marks the end of earnings season, so reports will be far fewer in number next week.

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