Ready or not, we should expect a week dominated by an even greater focus on Fed policy. There are four reasons:
- The economic data calendar is very light;
- Earnings season has ended;
- Many will be heading for the exits early, anticipating a holiday weekend; and finally
- Bernanke testifies on the economy before the Congressional Joint Economic Committee. There will also be other Fed speeches and the minutes of the last FOMC meeting.
Fedspeak
Two Viewpoints
a normal mean reversion
Background on "Weighing the Week Ahead"
weekly calendar from Investing.com
Last Week's Data
- The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially -- no politics.
- It is better than expectations.
- Retail sales were strongly positive. Last week I wrote that we would be focusing on the consumer, and this was a surprise for me. Steven Hansen has a very nice analysis at Global Economic Intersection. This analysis has charts and many comparisons, avoiding the controversies of the various adjustment processes. Take a look!
- Energy exporting from the U.S. is promising. See the first-rate discussion at ft.com.
- Building permits showed strong growth. Regular readers know that I favor this as a leading indicator on housing. So does Scott Grannis.
Michigan sentimentfrom Calculated Risk
The Bad
- Gas prices are moving higher. This is a surprise, since the trend in both oil and gasoline had been lower. Automotive Fleet covers this news – up six cents last week. Illinois is near the top of the list in prices ($4.20 – 4.25 here in the Chicago burbs) partly because of refinery problems. In my annual pickup trick for my son, there was a 65-cent swing in prices if you drove an hour south. (Derek has been an occasional contributor on my blog. Please indulge me in a bit of fatherly pride at his 4.0 as he completed his Junior year at Illinois).
- Household debt is lower – by 11.4% from the 2008 peak. Put another way, the U.S. consumer is reducing debt at the same time that overall consumption has been solid. See the details from Jeffry Bartash at MarketWatch.
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- Initial jobless claims spiked to 360K, about 30K higher than expectations. This is a noisy series with challenges related to seasonal adjustments, so everyone watches the four-week MA. It is still bad news, and worth special attention in the next few weeks.
- Housing starts declined sharply. Calculated Risk has this story and also a more comprehensive interpretation. The housing starts are quite disappointing, but distorted a bit by the sharp decline in multi-family units. Here is a good chart showing both types:
The Neutral
from The Bonddad Blog
The Ugly
Man Bites Dog
very nice Reuters story
The Indicator Snapshot
- The St. Louis Financial Stress Index.
- The key measures from our "Felix" ETF model.
- An updated analysis of recession probability.
not a market-timing tool
Bob Dieli's "aggregate spread.series of videos
free sample report.
excellent continuing coverage best chart update
Recession Resource Page
Ticker Sense Blogger Sentiment Poll
this article
The Week Ahead
- Initial jobless claims (Th). This is the high-frequency indicator on employment. Interest will be especially high after last week's surprise spike.
- New home sales (Th). Interest is greater than usual. Many are counting on strong housing data to offset the sequester, and expectations are high for the spring.
- Existing home sales (W). See above.
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- Durable goods (F). Interesting but volatile series.
- FOMC minutes (W). From the May 1stmeeting.
- FAFA home prices (W). These are the prices from the regular homes in the government market.
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What NOT to do
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Final Thought
another perspective
"Our stock markets seem to be enjoying themselves. Many ascribe the robust performance of stocks as nothing more than the consequence of friendly monetary policies all over the world. While I am sure this is playing its part, it was just as fashionable to argue the same easy monetary policies were also fuelling the commodity rally some time ago, so perhaps it isn't that simple.
Maybe something a bit more substantive is happening. After the pleasant surprise of +0.3pc real GDP in the UK in Q1, many of us were braced for the resulting setback, which would follow the pattern of the past couple of years. But while it is early days, quite a bit of recent economic news has continued to be on the positive side.
While much of the eurozone continues to struggle, US performance remains encouraging; a housing recovery and a competitive boost from cheaper domestic energy seem to have underpinned the improvement.
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And, while we don't export a great deal to Japan these days, the improving mood of the Japanese consumer to the country's monetary and fiscal boost suggests that a number of other economies will take heart. It is too soon to be singing in the streets, but the signs are looking better than they have for a while."
controversial article
Investment Implication