Wall Street is bracing for a busy week with a host of housing and manufacturing sector reports on deck. But all eyes will be on the the decision from the highly anticipated FOMC meeting, where the scale of tapering and Fed Chairman Ben Bernanke's speech is likely to influence the fate of the markets.
The Fed has telegraphed its intentions to pare back its monthly bond purchases as early as September, provided that they continue to see economic growth and improvement in employment. Based on consensus expectations, the Fed is seen trimming its monthly asset purchases by $10 billion, despite sluggish economic growth, since delays in any action could raise concerns that economic growth is going to be too anemic without the Fed's support.
Following are Sentiment charts for S&P 500 (NYSE:SPY), DOW Jones, and NASDAQ (NASDAQ:QQQ).
Following is an economic overview for the week September 16 - September 20, 2013.
(All times EST)
Monday, September 16
05:00 — Euro CPI:
Based on the August update, CPI remained at 1.6%, which is still below ECB's target inflation. If in the upcoming report, inflation increases, then this could reduce the chances of ECB slashing its cash rate.
Tuesday, September 17
01:30 — Great Britain CPI:
In July 2013, CPI declined to an annual rate of 2.8%. If the August report indicates a further decline in inflation, then this may affect the decision of BOE regarding its monetary policy.
08:30 — Canada Manufacturing Sales (m/m):
This report will present changes in manufacturing sales for July. In June 2013, manufacturing sales decreased by 0.5%. The upcoming report for July may affect the USD/CAD currency pair, which is strongly linked with commodities prices.
08:30 — US Core CPI (m/m):
Monthly report will present main developments in core CPI for August 2013. In July, the core CPI increased by 0.2%.
Wednesday, September 18
08:30 — US Building Permits:
In June building permits increased by 2.7% (m/m) as the adjusted annual rate of building permits reached 943K. If building permits continue to rise, it may indicate that the housing market's recovery is on track.
10:30 — US Crude Oil Inventories:
EIA (Energy Information Administration) will publish its weekly update on US crude oil inventories for the week ending on September 14, 2013.
14:00 — FOMC Statement and Press Conference:
Based on consensus expectations, the Fed is expected to trim its monthly spending on QE asset purchases by $10 billion — a smaller amount than previously expected. However, considering the slow progress in the labor market, the FOMC might decide to take different measures to stimulate the economy, such as revising up the inflation target, increasing the mortgage backed securities purchase program, or pegging the long term interest rates (10 years) at 2.5%. If the Fed introduces new measures, the US dollar is likely to get adversely impacted. A reduction in QE3, however, is likely to pull up the US dollar and drag down precious metals. Among all the data to come out of this September's FOMC meeting, the most interesting and market-moving may be what Fed officials pencil in for their 2016 forecasts. Projections that far ahead are subject to high uncertainty, but investors are expected pay close attention.
Thursday, September 19
04:00 — Great Britain Retail Sales:
This report will present developments in retails sales for August 2013 and any surprises are likely to affect the British Pound. In July 2013, retails sales increased by 1.1%, surpassing expectations for a rise of 0.7%.
08:30 — US Unemployment Claims:
Weekly report will refer to changes in initial jobless claims for the week ending on September 14, 2013. Last week jobless claims decreased by 31K to reach 292K. This upcoming weekly update may affect the US dollar and consequently commodities and stocks markets.
10:00 — US Existing Home Sales:
This report will present developments in US existing home sales for August 2013. In July 2013, existing home sales increased to a seasonally adjusted annual rate of 5.39 million houses.
10:00 — Philly Fed Manufacturing Index:
Based on the last update, growth rate fell from +19.8 in July to +9.3 in August. If the index continues to decline, it may adversely impact not only US dollar but also equity markets and commodities prices.
Friday, September 20
08:30 —Core CPI (m/m):
This report will present the CPI and core CPI (controlling the volatile components such as energy, fruit and vegetables) for August 2013. In July, the core CPI remained unchanged. This upcoming report might affect the Canadian dollar, which is strongly correlated with oil prices.
This commentary is for informational purposes only and does not constitute investment advice. The opinions offered herein are not recommendations to buy, sell or hold securities. Market IQ expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.