The markets reached new highs each day last week, despite poor manufacturing data and a weak employment report.
The S&P 500, which rose above the 1,600 level only about two weeks ago, is now less than 40 points away from 1,700. Along with the S&P 500, the Dow Jones industrial average has been setting a string of record highs. The Dow has gained 17.2% for the year. Additionally, technology sector has been on a roll — On Friday, NASDAQ closed at its highest level since October 2000.
Concerns about a technical correction have been a hot topic for weeks, especially as the rally accelerated in May — the S&P 500 is up 4.4% so far this month and up nearly 17% for the year. As U.S. stock indices inch higher and higher to set record after record, many analysts are shrugging off pullback worries.
This week's economic indicators will suggest whether a long overdue pullback will take place or if the markets will continue making new highs.
Following is an economic overview for the week May 20 - May 24, 2013.
(All times EST)
Tuesday, May 21
Japanese Monetary Policy Statement (tentative):
Bank of Japan will publish its interest rate decision, monetary policy for June and its outlook for the Japanese economy. In the past several weeks the Japanese yen has tumbled down against the US dollar and Euro. If Bank of Japan expands its current asset purchase program, this could drag down the Yen even further.
04:30 — Great Britain Consumer Price Index (CPI):
The report may affect the direction of the British Pound. In the report for March 2013, the CPI remained unchanged at an annual rate of 2.8%.
Wednesday, May 22
08:30 — Canada Core Retail Sales:
This report will refer to retails sales in Canada as of March. It may affect the USD/CAD currencies pair, which is strongly linked with commodities rates. In the report for February 2013, retails sales increased by 0.7%.
10:00 — U.S. Existing Home Sales:
The report will indicate the shifts in U.S. existing home sales for April 2013. In the report for March 2013, the number of homes sold slightly declined to a seasonally adjusted annual rate of 4.92 million houses. If this trend continues, it may add downward pressure to the U.S. dollar.
10:00 — Fed Chairman Bernanke Testifies:
Bernanke will testify before the Joint Economic Committee, U.S. Congress. The title of the speech is "Economic Outlook". Bernanke's testimony could stir up the markets, particularly the precious metals markets.
10:30 — Crude Oil Inventories:
The EIA (Energy Information Administration) will publish its weekly update on U.S. crude oil inventories for the week ending on May 17. In the recent update for May 10, crude oil inventories increased by 2.6 million barrels to reach 1798.3 million barrels.
14:00 — FOMC Meeting Minutes:
Following the April/May FOMC meeting, the Fed left its monetary policy unchanged, this had little effect on the markets. If the minutes reveal the Fed's intentions to consider easing down its asset purchase program in the next several months, this could drag down precious metals prices and impact the stock markets.
Thursday, May 23
03:30 — German Flash Manufacturing PMI:
This report serves as an indicator to the economic changes of the Euro Zone's leading economies' manufacturing conditions and may impact Euro/USD currency pair and consequently commodities prices. In the monthly report for April 2013, the German PMI declined to 47.9 indicating that manufacturing conditions were shrinking at a faster pace.
04:30 — Second Estimate GDP (q/q):
This report will present the second estimate of the quarterly growth rate of the Great Britain economy during the first quarter of 2013. In the third quarter the British economy contracted by 0.3%.
08:30 — U.S. Unemployment Claims:
Weekly report will refer to the changes in the initial jobless claims for the week ending on May 11. In the previous report the jobless claims rose by 32K to reach 360K; this forthcoming weekly report may affect the path of U.S dollar and consequently commodities and stocks markets.
10:00 — New Home Sales:
The report will give details about new home sales in U.S. for April 2013. In the March report, new homes sales rose to an annual rate of 417,000 — a 1.4% gain (month over month). If home sales continue to rise, it may indicate a sign of a recovery in the U.S. real estate market, which may also affect the U.S. dollar.
10:30 — Natural Gas Storage:
Weekly report of the U.S. natural gas market will refer to latest developments in natural gas production, storage, consumption and prices as of May 17. In last report, natural gas storage rose by 99 billion cubic feet to 1964 billion cubic feet.
15:30 — ECB President Speaks:
Mario Draghi will give a speech at an event organized by Lord Mayor, in London; the title of the speech is "The Future of Europe in the Global Economy". If Draghi provides some insight behind the future steps of the ECB's monetary policy, this speech could affect the Euro.
Friday, May 24
08:30 — Core Durable Goods Orders:
This report will refer to the changes in U.S. orders of durable goods in the manufacturing sector for April 2013. This monthly update may indirectly indicate the developments in U.S. demand for commodities such as oil and gas. As of March 2013, new orders of manufactured durable goods decreased to $216.3 billion. If this report presents another drop in new orders, it could pull down the US dollar and commodities prices.
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