Markets

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

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 inNew 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 Nasdaq, Inc.


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

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