Hurricane Isaac is heading towards New Orleans and is expected
to evolve from a tropical storm to hurricane as it makes landfall
later today or early tomorrow. The storm's impact is far from clear
at this stage, but key oil and gas production, refining and
petrochemical facilities fall in its likely path. No sustained
damage is expected, but even a temporary shutdown of the region's
refining capacity - about a fifth of the nation's total - will show
up in fuel prices nationwide.
While Isaac is in the headlines, the major event that investors are
focusing on is Bernanke's Jackson Hole speech on Friday, in which
the Fed chairman is expected to layout the contours of monetary
policy. Bernanke had used the same forum to announce the last bond
purchase program in 2010 and many seem to be counting on a repeat
performance. But the central bank was concerned about deflationary
pressures back then, while the pace of economic growth is the
primary issue at present.
The question is whether the economy's growth momentum is weak
enough to warrant a new bond purchase program. The last FOMC
meeting seemed to be leaning towards more easing, but we have had a
few stronger looking economic reports since then, prompting many to
wonder if the Fed will actually follow through.
While questions remain about the overall health of the U.S.
economy, one major segment that has lately been showing signs of
improvement is housing. This has helped build momentum in the stock
prices of homebuilders like
We will get a key home price reading today through the June
S&P/Case-Shiller home price index. The Case-Shiller index does
not represent real-time developments in home prices, but it is
nevertheless a good gauge of pricing trends on a national basis.
Today's data is expected to show positive year-over-year gain for
the main 20-city index, which will be the first for that benchmark
since the fall of 2010 when government tax credits gave the sector
a temporary boost. Excluding that one-off 2010 positive
year-over-year gain for the price index, we would have to go back
to late 2006 for a positive reading.
Housing is critical to the stabilization of the economic growth
outlook as it has knock-on effects in a number of different
sectors. Given the favorable developments in this key sector of the
economy, housing is expected to be a net positive contributor to
GDP growth this year, the first time this would be happening since
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