Trading Radar: Key Manufacturing and Spending Data Will Set Tone for Q3

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With this week over, let's take a look ahead at what's going to move the market next week.

The following are the three main events to watch: The results of elections in Germany (don't call it Angela Merkel's comeback), the tenor from Fed members (who lost some street cred last week), and the direction of economic data (which has to be not too hot, not too cold, but just right).

In German elections, Chancellor Merkel is expected to overwhelmingly win her third term, which ends on Sunday. The main question is whether or not she gains the majority with her Free Democratic Party or has to form an alliance with her opponents, the Social Democrats. Much of Merkel's campaigning has focused on the 17-member Euro coalition, which Merkel calls a mistake, though Germany is economically disincentivized to break up the union given progress being made on the fiscal front. If Merkel is forced to form a coalition, some uneasiness may creep into the markets.

Going into the September FOMC meeting, members were divided in their messages, although most had dovish leanings. This week, several district Fed presidents are set to speak. We'll see if there is a consensus among all members about whether financial conditions had tightened enough in conjunction with moderating growth to warrant no change in monetary policy. One specific concern was that rising mortgage rates would choke off the housing recovery. Thus far, with the rise in real interest rates not coincident with rising incomes, we think that housing prices stand a high chance of trending back towards very low growth.

There will be three key economic reports during the week: August durable and capital goods orders, new home sales, and personal income/spending. All of these are very important because they will set the underlying tone of manufacturing and consumption growth in the third quarter.

Throughout the year, consumer spending growth has continued to struggle, falling to a 50-year low, in light of tax hikes and reduced fiscal spending. Additionally, capital goods orders fell 3.3% in July, a sign that economic growth is slowing in the third quarter. Lastly, new home sales fell 13.4% in July to an annualized rate of 394,000, the biggest one-month drop since April 2010 and the second worst on record. Discussions with mortgage bankers lately have indicated that homebuyers have become paralyzed by the rise in interest rates and builders have moderated their pace of construction. Both parties believe that these effects are short-term in nature. Economists are expecting new home sales to snap back to their trend level of growth, consistent with the return in existing home sales. August MBA mortgage applications for purchase fell by 1.62%.

The main earnings reports for the week come from the homebuilders Lennar ( LEN ) and KB Home ( KBH ). Coming out of the second quarter, the homebuilders were cautious on their outlook as interest rates had spiked higher. However, building activity seems to have continued its uptrend, albeit at a slower pace. The other notable report for the week comes from Nike ( NKE ), the first retailer of the quarter, and one with a broad international footprint. Expectations for retailers in the quarter are low.


Monday, September 23

US Economics (Time Zone: EDT)

08:30 Chicago Fed National Activity - consensus -0.05, prior -0.15
08:58 Markit US PMI Preliminary - consensus 54.0
11:00 Fed to purchase $3b-$4b notes in 6 to 7-year range
11:30 Treasury selling $30b 3-month bills, $25b 6-month bills

Fedspeak

9:20am Lockhart speaks in New York
9:30am Dudley speaks in New York
1:30pm Fisher speaks in San Antonio

Global Economics (Time Zone: GMT)

01:45 CNY HSBC/Markit Flash Manufacturing PMI
07:30 EUR German Manufacturing and Services PMI
08:00 EUR Eurozone Manufacturing and Services PMI
6:00am Draghi speaking in Brussels

Earnings

After:
Red Hat ( RHT )


Tuesday, September 24

US Economics (Time Zone: EDT)

09:00 S&P/CS 20 City MoM - consensus 0.80%, prior 0.89%
09:00 S&P/CS 20- City YoY - consensus 12.40%, prior 12.07%
09:00 FHFA Home Price Index MoM - consensus 0.8%, prior 0.7%
10:00 Richmond Fed - consensus 11, prior 14
10:00 Consumer Confidence - consensus 80.0, prior 81.5
11:00 Fed to purchase $1.25b-$1.75b bonds in 23 to 30-year range
11:30 Treasury selling 4-week bills
1:00 Treasury selling $33b 2-year notes

Fedspeak

9:30am Pianalto speaks in Chicago
1:00pm George speaks in Chicago

Global Economics (Time Zone: GMT)

08:00 EUR German IFO Economic Expectations
08:30 GBP New Home Loans
12:30 CAD Retail Sales

Earnings

Before:
KB Home ( KBH )
Lennar ( LEN )
CarMax ( KMX )
Carnival Cruise (CCL)


Wednesday, September 25

US Economics (Time Zone: EDT)

7:00 MBA Mortgage Applications
08:30 Durable Goods Orders - consensus 0.0%, prior -7.3%
08:30 Durable Goods ex-Transports - consensus 1.0%, prior -0.8%
08:30 Cap Goods Orders Nondef Ex-Air - consensus 2.0%, prior -4.0%
08:30 Cap Goods Shipments Nondef Ex-Air - consensus 1.0%, prior -1.7%
10:00 New Home Sales - consensus 420K, prior 394K MoM% +6.6% vs -13.4% prior
12:00 2Q Household Change in Net Worth
11:00 Fed buying $2.75b-$3.5b notes in 7 to 10-year range
1:00 Treasury selling $35b 5-year notes

Global Economics (Time Zone: GMT)

05:00 JPY Small Business Confidence
06:00 EUR German GfK Consumer Confidence Survey
06:00 JPY Machine Tool Orders

Earnings

Before:
AutoZone (AZO)

After:
Bed Bath & Beyond (BBBY)


Thursday, September 26

US Economics (Time Zone: EDT)

08:30 Initial Jobless Claims - consensus 330k, prior 292k
08:30 Continuing Claims - consensus 2913K, prior 2871K
08:30 GDP Annualized QoQ (2Q final estimate) - consensus 2.6%, prior 2.5%
08:30 Personal Consumption - consensus 1.8%, prior 1.8%
08:30 GDP Price Index - consensus 0.8%, prior 0.8%
08:30 Core PCE QoQ - consensus 0.8%, prior 0.8%
10:00 Pending Home Sales MoM - consensus -1.0%, prior -1.3%
10:00 Pending Home Sales YoY - consensus 6.8%, prior 8.6%
11:00 Kansas City Fed Manuf Activity - consensus 8, prior 8
11:00 Fed to purchase $1.25b-$1.75b notes in 23 to 30-year range
1:00 Treasury selling $29b 7-year notes

Fedspeak

10:10am Stein speaks in Frankfurt
12:15pm Kocherlakota speaks in Michigan
9:15pm George speaks in Denver

Global Economics (Time Zone: GMT)

08:30 GBP GDP 2Q final estimate
23:30 JPY CPI

Earnings

After:
Nike ( NKE )


Friday, September 27

US Economics (Time Zone: EDT)

08:30 Personal Income - consensus 0.4%, prior 0.1%
08:30 Personal Spending - consensus 0.3%, prior 0.1%
08:30 PCE Deflator YoY - consensus 1.2%, prior 1.4%
08:30 PCE Core YoY - consensus 1.3%, prior 1.2%
09:55 University of Michigan Confidence Statement (1 st estimate) - consensus 78.0, prior 76.8
11:00 Fed purchasing $4.75b-$5.75b notes in 5 to 6-year range

Fedspeak

5:45am Evans speaking in Oslo, Norway
8:30am Rosengren speaks in New York
10:15am Evans speaking on panel in Oslo
2:00pm Dudley speaks in New York

Global Economics (Time Zone: GMT)

JPY Japanese Investors Buying of Foreign Stocks/Bonds
01:30 CNY Industrial Profits
09:00 EUR Eurozone Consumer Confidence
12:00 EUR German CPI

2:00am Draghi speaking in Milan

Earnings

No major earnings reports


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: KBH , KMX , LEN , NKE , RHT

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