Trading Radar: June FOMC Minutes Is the Focus for Next Week

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Friday's jobs report had a little bit for everybody, and conflicting information of course. It's important to remember that this is the first estimate and will be revised over the next two months, in both directions. The percentage of unemployed due to voluntarily leaving a job increased to 8.8% from 8.1% the prior month, which typically signals optimism since most people leave a job believing they will find another one. Additionally, the average duration of unemployment fell to 35.6 weeks from 36.9 weeks and average weekly earnings increased 0.4% MoM to a 2.5% annual rate. The negatives were a large spike in the U4-U6 rates, which means workers are taking part-time jobs due to economic reasons.

The headline focus for next week will be on one event: the June Federal Open Market Committee (FOMC) meeting.

At an FOMC press conference last month, Federal Reserve Chairman Ben Bernanke was the most transparent about forward rate policy of any Fed chief in history. His openness was unsettling for the market because it removed any uncertainty about the central bank's thinking. In next week's minutes, due out Wednesday, July 3, market participants will be looking for answers to a few questions:

  • Did the Fed abandon its implied inflation target of 2.5%?
  • Would the Fed's asset purchasing program pass a cost-benefit analysis test, as Fed board member Jeremy Stein implied it would at his recent speech in New York ?
  • Are the unemployment thresholds dependent upon changes -- up or down -- in the participation rate?
  • Did Fed officials see irrational exuberance in asset prices as a large majority have commented on in recent speeches?
Producers Squeezed?

Next Friday, July 7, market investors will be keeping a close eye on the monthly producer price index, seen as one indicator of inflation trends. In the month of May, producer prices rose 1.6% year-over-year, but they rose at a faster rate than consumer prices (1.4% YoY), which implies that producers were unable to pass along their rising costs of production to consumers and will now face lower margins. The year-over-year gain is expected to rise by 2.0%, though this is only due to the rise in fuel costs, as core prices are not expected to reflect a gain.

Consumers Confidence Expected to Rise

The last notable economic datapoint is the first estimate of the University of Michigan/Reuters consumer confidence statement, to be released next Friday. Average weekly earnings in June rose to $828.35 from $824.90 the month prior and asset prices remain high, so consumer confidence should also remain high. The detractors are the large gains in the "discouraged" and "unemployed for economic reasons" categories of the June employment report.

In the week ahead, the US Treasury will hold three auctions totaling $66 billion: $32 billion in 3-year notes and reopenings of $21 billion in 10-year and $13 billion of 30-year bonds. With rising rates, participants will be unsure as to whether there is a bid for paper from Uncle Sam. Lastly, Fed Chairman Ben Bernanke will give a speech on economic policy on 4:10 p.m. ET on Wednesday. Over the past two weeks various Fed officials have preached that the markets misunderstood the Fed's message. Arguably, they have understood it too much as we continue to price in the fastest monetary tightening cycle in history, which is troubling.

Overseas data is mostly filled with industrial production. The UK, eurozone, and the Swiss will report industrial production for the month of June throughout the week. The other event to note is the Bank of Japan's rate decision that will take place before Thursday's trading day in the US. News reports from the Nikkei newswire indicate that Chairman Kuroda may make more favorable comments on the economic outlook for Japan.

Alcoa ( AA ), typically the company that kicks off earnings season, will report after the close on Monday. Financial earnings will begin on Friday with JPMorgan ( JPM ) and Wells Fargo ( WFC ). In particular with the financial earnings, investors will be paying attention to what losses are incurred on these banks due to their large holdings of interest-rate sensitive debt.

MONDAY, July 8

US Economics (Time Zone: EDT)
3:00 USD Consumer Credit - May, est. $12.500B, prior $11.058B
11:00 Fed to purchase $1.25b-$1.75b bonds in 23 to 30-year range
11:30 Treasury selling $30b 3-month, $25b 6-month bills

Global Economics (Time Zone: GMT)
01:30 AUD ANZ Job Advertisements
03:30 JPY Bankruptcies
5:45 CHF Unemployment Rate
7:15 CHF Industrial Production
8:30 EUR Euro-Zone Sentix Investor Confidence
10:00 EUR German Industrial Production
12:30 CAD Building Permits
22:45 NZD NZ Card Spending
23:01 GBP RICS House Price Balance

Earnings
Alcoa ( AA ) is expected to report EPS of $0.09.
CrowdGather ( CRWG ) is expected to report EPS of -$0.01.
Synergy Resources Corporation ( SYRG ) is expected to report EPS of $0.07.
WD-40 (WDFC) is expected to report EPS of $0.56.


TUESDAY, July 9

US Economics (Time Zone: EDT)
7:30 NFIB Small Business Optimism - June prior 94.4
7:45 ICSC-Goldman Store Sales
8:55 Redbook
10:00 JOLTs Job Openings - May prior 3757
11:00 Fed purchasing $2.75b-$3.5b notes in 7 to 10-year range
11:30 Treasury selling 4-week bills
1:00 Treasury selling $32b 3-year notes

Global Economics (Time Zone: GMT)
01:30 AUD NAB Business Confidence
01:30 CNY Consumer Price Index
6:00 JPY Machine Tool Orders
7:15 CHF Retail Sales
8:30 GBP Industrial Production
8:30 GBP Manufacturing Production
8:30 GBP Visible Trade
8:30 GBP Trade Balance
12:15 CAD Housing Starts
14:00 GBP NIESR Gross Domestic Product
23:50 JPY Tertiary Industry Index

Earnings

Healthcare Services Group (HCSG) is expected to report EPS of $0.20.
Helen of Troy Limited (HELE) is expected to report EPS of $0.69.
Wolverine World Wide (WWW) is expected to report EPS of $0.34.


WEDNESDAY, July 10

US Economics (Time Zone: EDT)
7:00 MBA Mortgage Applications, July 5
10:00 Wholesale Inventories - May, est. 0.2%, prior 0.2%
10:00 Wholesale Sales MoM - May prior 0.5%
10:00 EIA Petroleum Status Report
14:00 Fed Releases Minutes from Jun 18-19 FOMC Meeting
11:00 Fed purchasing $3b-$3.75b notes in 6 to 7-year range
1:00 Treasury selling $21b 10-year notes (1 st reopening)

Fedspeak:
4:10pm Bernanke to speak on economic policy in Boston

Global Economics (Time Zone: GMT)
00:30 AUD Westpac Consumer Confidence
05:00 JPY Consumer Confidence Index
06:00 EUR German Consumer Price Index
22:30 NZD Business NZ Performance of Manufacturing Index
23:50 JPY Machine Orders

Earnings
ADTRAN (ADTN) is expected to report EPS of $0.15.
Family Dollar Stores (FDO) is expected to report EPS of $1.04.
MSC Industrial Direct (MSM) is expected to report EPS of $0.96.
Novagold Resources (NG) is expected to report EPS of -$0.03.
Price Smart (PSMT) is expected to report EPS of $0.64.
Raptor Pharmaceuticals (RPTP) is expected to report EPS of -$0.29.
SuperValu (SVU) is expected to report EPS of $0.02.
Yum! Brands (YUM) is expected to report EPS of $0.54.


THURSDAY, July 11

US Economics (Time Zone: EDT
8:30 Import Price Index MoM - June, est. 0.0%, prior -0.6%
8:30 Import Price Index Yoy, est 0.4% prior -1.9%
8:30 Initial Jobless Claims - est 337K, prior 343K
8:30 Continuing Claims - est 2952K, prior 2933K
10:30 EIA Natural Gas Storage Change
14:00 Monthly Budget Statement - June
11:00 Fed purchasing $1b-$1.5b TIPS in 4 to 30-year range
1:00 Treasury selling $13b 30-year bonds (1 st reopening)

Global Economics (Time Zone: GMT)

JPY Bank of Japan Rate Decision
01:00 AUD Consumer Inflation
01:30 AUD Full Time Employment Change
01:30 AUD Employment Rate
08:00 EUR ECB Monthly Report
12:30 CAD New Housing Price Index

Earnings
Bank of Ozarks (OZRK) is expected to report EPSS of $0.57.
Ceres (CERE) is expected to report EPS of -$0.33.
Commerce Bancshares (CBSH) is expected to report EPS of 0.72.
Grupo Televisa S.A. (TV) is expected to report EPS of $0.32.
Progressive (PGR) is expected to report EPS of $0.4.
Washington Federal (WAFD) is expected to report EPS $0.33.


FRIDAY, July 12

US Economics (Time Zone: EDT)
8:30 Producer Price Index Mom - June, est. 0.5%, prior 0.5%
8:30 Producer Price Index Ex Food & Energy Mom - June, est. 0.1%, prior 0.1%
8:30 Producer Price Index Yoy - June, est 2.1% prior 1.7%
8:30 Producer Price Index Ex Food & Energy Yoy - June, est 1.6% prior 1.7%
9:55 University of Michigan Confidence, est 85.0, prior 84.1
11:00 Fed purchasing $1.25b-$1.75b bonds in 23 to 30-year range

Fed Speak
5:15 Fed Williams Presents Monetary Policy Paper in Vancouver

Global Economics (Time Zone: GMT)
01:30 AUD Home Loans
04:30 JPY Industrial Production
09:00 EUR Euro-Zone Industrial Production

Earnings
iGATE Corporation (IGTE) is expected to report EPS of $0.29.
Infosys (INFY) is expected to report EPS of $0.69.
JPMorgan ( JPM ) is expected to report EPS of $1.40.
Webster Financial (WBS) is expected to report EPS of $0.47.
Wells Fargo ( WFC ) is expected to report EPS of $0.92.

Market Commentary

Here's a look at our top five market stories from this week:

Bond Market's Memo to the Fed: This Is Not a Misunderstanding, This Is a Blow-Up


The Stock Market, The Sopranos, and My Crazy Dream About the US Fed


Is It Time for High Yield or High Quality Bond ETFs?

Random Thoughts: Catalysts Abound Heading Into the Holiday


Lloyd's Wall of Worry: What Investors Are Nervous About this Week

Twitter: @MichaelSedacca



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AA , CRWG , JPM , SYRG , WFC

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