Get ready for the biggest economic data dump of the summer. Smack-dab in the middle of earnings season, the big three of the week include the first reading on Q2 GDP, a Federal Reserve policy meeting AND the monthly jobs report. BUT WAIT, THERE’S MORE! There will also be fresh information on home prices and construction spending; manufacturing reports and factory orders; auto sales; and personal income and spending.
Before you turn off your brain for August, here’s what you need to know:
GDP: It looks like the combination of that pesky sequester and a general spring slowdown may have conspired to drag down second quarter growth to a measly 1 percent annual rate -- and you thought that Q1’s 1.8 percent was bad!
Before you start jumping the gun and thinking that that the Fed will delay its tapering efforts, in his recent Congressional testimony, Chairman Ben Bernanke blamed the current weakness on the "strong headwinds" from fiscal tightening (sequestration). Those headwinds are expected to recede later this year, which means that growth is likely to accelerate in the second-half.
Last week’s final reading of consumer sentiment could indicate better times ahead. Americans were more confident about the economy than they have been at any time over the past six years. The hope is that consumers will concentrate on rising home prices and steady job gains, shake off this year’s payroll tax hike and start to spend with a bit more gusto.
On the corporate side, a firming in the second-half might convince the non-financial companies that comprise the S&P 500 to spend some of the $1.3 trillion worth of cash that they have amassed. 55 percent of the economists polled by the National Association of Business Economists (NABE) in June expect their firms to increase spending over the next 12 months, up 40 percent from the January survey covering the final months of 2012.
In addition to the Q2 report, the Bureau of Economic Advisors will release comprehensive revisions to GDP for prior years. Many economists believe that the adjustments could be significant on the upside and could make the recovery look more in line with historic averages.
Federal Reserve Policy Meeting (FOMC): Don’t expect much from this meeting. Ever since the Fed introduced the concept of press conferences and economic projections during four of its eight annual meetings, it has saved the juicy stuff for those times. That means the next biggie will be in September, when FOMC participants update their economic projections and Chairman Ben Bernanke holds a post-meeting press conference.
The Fed will likely keep buying $85 billion-a-month worth of bonds and will keep short-term interest rates near zero at least until the jobless rate drops to 6.5 percent or unless inflation rises to a 2.5 percent annualized rate. There could be a bit of word-smithing in the accompanying statement, but nothing that is likely to be market moving.
Jobs report: The economy has added about 200,000 jobs per month this year and the unemployment rate has declined from 7.9 percent at the beginning of the year to the current level of 7.6 percent. In July the economy probably added 150,000 to 200,000 jobs and the unemployment rate should come in at 7.5 to 7.6 percent, subject to the size of the labor force. Economists will keep an eye on revisions to the prior two months -- in June, the net revisions for April and May were up 70,000. Additionally, the dismal scientists will see whether last month’s larger than expected increase in average hourly earnings (+0.4 percent to 2.2 percent over the past year) confirm a new trend or whether the pace will slow down.
Markets Anyone else want to just put a halt to trading for the rest of the year? According to S&P Capital IQ, the current bull market is now 53 months old, which is a bit longer than the average of the 17 bull markets since 1921, which have lasted an average 49 months. Their average price rise from the bottom has been 153 percent, which is close to the 150 percent increase the S&P 500 has seen from its closing low of 676 on March 9, 2009.
- DJIA: 15,558, up 0.1% on week, up 18.7% on year
- S&P 500: 1691, down 0.03% on week, up 18.6% on year (first weekly loss in five weeks)
- NASDAQ: 3613, up .7% on week, up 19.7% on year
- 10-Year Treasury yield: 2.57% (from 2.49% a week ago)
- Sep Crude Oil: $104.70, down 2.9% on week
- Dec Gold: $1321.50, up 2.2% on week
- AAA Nat'l average price for gallon of regular Gas: $3.64
THE WEEK AHEAD:
10:00 Dallas Fed Manufacturing Survey
10:00 Pending Home Sales
BP, Chrysler/Fiat, Merck, Pfizer
FOMC Meeting Begins
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
Comcast, MasterCard, Allstate, CBS, Marriott, MetLife, Whole Foods
8:15 ADP Employment Report
8:30 Q2 GDP (1st estimate; Q1=+1.8%)
9:45 Chicago PMI
2:00 FOMC Meeting Announcement (No change expected)
ConocoPhillips, ExxonMobil, P&G, Royal Dutch Shell, Clorox, AIG, Kraft Foods, LinkedIn
European Central Bank and Bank of England policy meetings
7:30 Challenger Job-Cut Report
8:30 Weekly Jobless Claims
8:58 PMI Manufacturing Index
10:00 ISM Mfg Index
10:00 Construction Spending
8:30 July Jobs Report
8:30 Personal Income and Spending
10:00 Factory Orders