The Stock Market Pulse

($49.95/month value)

Week of March 30th, 2009

 

Weekly review of the markets

 

Last week, the rally was stopped by an important resistance. Early in the week we wouldn't have been surprised if the retracement continued a little.

Monday, good news on the existing home sales contradicted that theory with a 5.1% vs the -0.9% we were expecting. This basically indicates that credit in real estate is improving which set the table nicely for the the treasury's announcement regarding the details of their plan to relieve banks of toxic assets... What's mostly interesting here is that the market seems to be turning positive in terms of sentiment since the same in February turned a 5% loss... This time around we had a 7% increase in one day! Its definitely seems like investors are seeing better times ahead from here which is important for a sustained recovery considering it depends mostly on investors sentiment...

Tuesday, not much was on tap on the economic news front so it's not surprising that a lot of investors cashed in on the preceding record day...

Wednesday, more good news when durable goods and new home sales also came out higher then expected. The day was up and down but finally turned positive before the close.

Thursday the GDP came out with a 6.3% contraction figure, which is not as bad as what we expected... Notice the surprises now are positive vs the last months when somehow analysts always got it wrong; maybe they're catching on... :-) But the main reason for the good day we had was due to BestBuy's god result and even better outlook! is the market really waking up?

Friday, after 4 days of rallying and 8% in the bank, friday was payday so most of the day saw investors taking their profits but we managed to hold on to a 6% weekly gain. The last three weeks of gains are starting to change investors sentiment so this could be it folks!

This Week not much will happen on Monday on the economic front but Tuesday we will start with consumer confidence and the Chicago PMI which are two forward looking indicators vs indicators like construction spending which looks back. It could be a turning point in this rally we started a few weeks ago. Right now the sentiment is turning positive but id like to warn you right now. The last few weeks I remained negative even if a rally was under way and I still remain cautious right now although the recent good news are starting to get to me and even I am starting to think we might be coming out of it but that being said, i still think we will retrace significantly before the "real" recovery. On that note, IF we do not retrace significantly it would be a shame to miss the next move up so here's my piece of advise: Get back in the market now but do it in installments over the next 6 months. This way your average price will be better and you won't have to worry about the markets fluctuation...

Technically, looking back 6 months we see we are at a cross of the road for most indexes and have reached a major resistance level.

 

The SnP crossed 800 but like I said we are at a resistance right now so the slightest bad news and we will go down, quickly...

 

 

The Dow is stil short of the 8000 milestone and its trend is still down...

 

The Nasdaq moved over its trend line but 1600 could act as a major resitance here...

 

*if you want more information on technical indicators and Technical analysis in general I strongly recommend you click here

 

Economic Calendar Data Source: Bloomberghttp://www.bloomberg.com/markets/ecalendar/index.html

(Reports I consider will impact the market the most with definitions and expectations)

 (Soon to be a section for Investor Rules members only ) Not a member yet? Just go to

 

http://www.InvestorRules.com/membership.html

 

 

Monday March 30th

 

Farm Prices

Definition

The Department of Agriculture releases the index of prices received by farmers at the end of the month for the current month. It reflects changes through the middle of the month. The index is not adjusted for seasonal variation. It includes crop prices and livestock & product prices. Analysts monitor farm prices in order to see early warnings of inflation or deflationary pressures in the economy.

Why Do Investors Care?
Farm prices are a leading indicator of food price changes in the producer and consumer price indices. There is not a one-to-one correlation, but general trends move in tandem.

Investors need to monitor inflation closely. An individual investor who understands the process of inflation and how inflation influences the markets will no doubt benefit over those investors that don't understand the consequences of inflation.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how data such as farm prices influence the markets - and your investments.

If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation, because you know that the $100 won't be able to buy the same amount of goods and services a year from now, as it does today. If you were in a country where prices doubled every couple of months, you might want to charge 400% interest for a total payoff of $500 at the end of the year. In the United States, farm prices tells us that food prices were falling through the summer of 2005. This represents only one sector of the economy though. At the same time, the CPI was rising 3 to 3.5 percent during this period. You might want to add in one or two percentage points to cover default risk and the opportunity cost, but inflation remains the key variable in what interest rate you would charge.

Inflation (along with default risk and opportunity cost) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates accordingly. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking the trends in inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform.

Tuesday March 31st

 

 

ICSC-Goldman Store Sales
7:45ET

Definition
This weekly measure of comparable store sales at major retail chains, published by the International Council of Shopping Centers, is related to the general merchandise portion of retail sales. It accounts for roughly 10 percent of total retail sales.

Why Do Investors Care?
Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005.

The ICSC-Goldman index is one of the most timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005. The ICSC-Goldman Sachs store sales series previously was known as ICSC-UBS before Goldman Sach's involvement with ICSC. The name change took place with the September 30, 2008 release.

 

Redbook
8:55 ET

Definition
A weekly measure of sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC index. It is also calculated differently than other indicators. For instance, figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering only about 10 percent of total retail sales.

Why Do Investors Care?
Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005.

The Redbook is one of the more timely indicators of consumer spending, since it is reported every week. It gets extra attention around the holiday season when retailers make most of their profits. It is also a useful indicator when special factors can cause economic activity to momentarily slide. For instance, it was widely watched in the aftermath of Hurricanes Katrina and Rita which hit New Orleans and the Gulf Coast in 2005.

 

S&P Case-Shiller HPI

Definition

The S&P/Case-Shiller® home price index tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S. The composite indexes and the regional indexes are seen by the markets as measuring changes in existing home prices and are based on single-family home resales. The key composite series are for the longer-running, original 10-city composite series and the newer and expanded 20-city composite. A national index is published quarterly. The indexes are based on single-family dwellings with two or more sales transactions. Condominiums and co-ops are excluded as is new construction. The data are compiled for S&P by Fiserv, Inc. The S&P/Case-Shiller Home Price Indices are published monthly on the last Tuesday of each month at 9:00 AM ET. The latest data are reported with a two-month lag. For example data released in January 2008 were for November 2007.  
Why Investor's Care

Home values affect much in the economy — especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers’ ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

With the onset of the credit crunch in mid-2007, weakness in home prices has had the reverse impact on the economy. New housing construction has been impaired and consumers have not been able to draw on home equity lines of credit as in recent years. But an additional problem for consumers is that a decline in home values reduces the ability of a home owner to refinance. During 2007 and into 2008 this became a major problem for subprime mortgage borrowers as adjustable rate mortgages reached the end of the low, “teaser rate” phase and ratcheted upward. Many subprime borrowers had bet on higher home values to lead to refinancing into an affordable fixed rate mortgage but with home equity values down, some lenders balked at refinancing subprime borrowers.

Many economists believe that the U.S. economy and especially the depressed housing sector will not fully stabilize until home prices firm back up. This makes watching home prices all the more important for the investor.

 

NAPM-Chicago
09:45ET
Consensus 35.0

Definition
The National Association of Purchasing Management - Chicago compiles a survey and a composite diffusion index of business conditions in the Chicago area. Manufacturing and non-manufacturing firms are both surveyed, but until recently, market players have believed that the survey primarily covers the manufacturing sector. Readings above 50 percent indicate an expanding business sector. The NAPM - Chicago is considered a leading indicator of the ISM manufacturing index.

Why Do Investors Care?
Investors should track economic data like the NAPM - Chicago to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures.
The NAPM - Chicago gives a detailed look at the Chicago region's manufacturing and non-manufacturing sectors. Many market players don't realize that non-manufacturing activity is covered in this index and tend to focus on the manufacturing side only. Consequently, market players consider this as a leading indicator for the ISM manufacturing survey. On its own, it can be viewed as a regional indicator of general business activity. Some of the NAPM - Chicago's sub-indexes also provide insight on commodity prices and other clues on inflation. The Federal Reserve closely watches this report because in its long history, it has proven to be a good indicator of business activity as well as inflation. As a result, the financial markets can be highly sensitive to this report.

Market Consensus Before Announcement
The ISM-Chicago business barometer edged 9 tenths higher in February but remained at a still severely contractionary 34.2. This index has been stuck at such depressed levels for four straight months. New orders were little changed at 30.6 with backlogs showing slightly less contraction compared to January at 29.3.
 

The NAPM-Chicago Survey registers manufacturing and non-manufacturing activity in the Chicago region. Investors care about this indicator because the Chicago region mirrors the nation in its distribution of manufacturing activity. Consequently, the NAPM-Chicago survey often moves together with the ISM index, but is reported one day in advance.

Data Source: Haver Analytics

Consumer Confidence
10:00 AM
Consensus is 38.0

 

Definition
The Conference Board compiles a survey of consumer attitudes on present economic conditions and expectations of future conditions. Five thousand consumers across the country are surveyed each month. While the level of consumer confidence is associated with consumer spending, the two do not move in tandem each and every month.

Why Do Investors Care?
The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Consumer confidence did shift down in tandem with the equity market between 2000 and 2002 and then recovered in 2003 and 2004. Consumers became more pessimistic in 2005 when gasoline prices surged.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.

Market Consensus Before Announcement
The Conference Board's consumer confidence index in February fell to a record low in more than 40 years of data to 25.0 from 37.4 in January. The worst news in the report was a 15-point fall back in the expectations component, to 27.5. Expectations appear to have been knocked down largely on a bleak job market. Only 4.4 percent of the sample said jobs are currently plentiful with 47.8 percent saying they are hard to get. Based on the latest jobless claims numbers, the unemployment rate is still trending upward and likely is keeping confidence low.

Typically retail sales will move in tandem with consumer optimism - although not necessarily each and every month.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/27 2/24 3/31 4/28 5/26 6/30 7/28 8/25 9/29 10/27 11/24 12/29 Released For: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

 

SPEECHES

13:00
Philadelphia Federal Reserve Bank President Charles Plosser delivers speech on regulatory reform to the University of Chicago Booth School of Business. Audience and media Q&A expected.

 

 

Wednesday April 1st    

 

Motor Vehicle Sales
 
Definition

Unit sales of domestically produced cars and light duty trucks (including sport utility vehicles and mini-vans). Individual manufacturers report usually report sales on the first business day of the month. Motor vehicle sales are good indicators of trends in consumer spending.

Why Do Investors Care?

Since motor vehicle sales are an important element of consumer spending, market players watch this closely to get a handle on the direction of the economy. The pattern of consumption spending is one of the foremost influences on stock and bond markets. Strong economic growth translates to healthy corporate profits and higher stock prices. The bond market focus is on whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s.

Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, although motor vehicle sales moderated to a lesser extent. A low interest rate environment through 2005 curtailed the decline in motor vehicle sales. Granted, since automakers offered many incentives to boost sales in the past several years, their profits have suffered.

In a more specific sense, auto and truck sales show market conditions for auto makers and the slew of auto-related companies. These figures can influence particular stock prices and provide insight to investment opportunities in this industry. Given that most consumers borrow money to buy cars or trucks, sales also reflect confidence in current and future economic conditions.

Market Consensus Before Announcement
Sales of domestic motor vehicles fell to a 6.4 million annual rate in February, down from an already deeply contractionary 6.8 million in January. Continued worries about rising unemployment and whether U.S. auto manufacturers will have to file for bankruptcy will likely keep the sales pace weak in March.
 

Motor vehicles sales slowed notably in 2006 as a result of higher interest rates and a jump in gasoline prices but remained at reasonable levels due to strong income growth. Late in 2006 and in early 2007, gasoline prices were down from 2006 highs but moderating economic growth kept sales from rebounding. Truck shares hit their peak in 2005 when gasoline was cheap and remain sharply lower since gasoline prices spiked in 2006.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/5 2/3 3/3 4/1 5/1 6/1 7/1 8/3 9/1 10/1 11/2 12/1 Released For: Dec Jan 2009 Feb 2009 Mar 2009 Apr 2009 May Jun 2009 Jul 2009 Aug 2009 Sep 2009 Oct 2009 Nov 2009

 

 

MBA Purchase Applications
07:00ET

Definition

The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

Why Do Investors Care?

This provides a gauge of not only the demand for housing, but economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the Mortgage Bankers Association purchase applications, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once a home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, housing construction has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the MBA purchase applications index carries valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

 

Challenger Job-Cut Report
7:30ET

Definition
This monthly report counts and categorizes announcements of corporate layoffs, but it must be analyzed with caution. It doesn't distinguish between layoffs scheduled for the short-term or the long term, or whether job cuts are handled through attrition or actual layoffs. Unlike most economic data, this series is not adjusted for seasonal variation. (Challenger, Gray & Christmas, Inc.)  
Why Investor's Care
Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Spending at major retail chains did slow down in tandem with the equity market in 2000 and 2001 and again in 2003, but strengthened in 2004 and 2005.

Chain store sales not only give you a sense of the big picture, but also the trends among individual retailers and different store categories. Perhaps the discount chains such as Target and Wal-Mart are doing well, but the high-end department stores such as Tiffany's are lagging. Maybe apparel specialty retailers are showing exceptional growth. These trends from the monthly chain store data can help you spot specific investment opportunities, without having to wait for the quarterly or annual reports.

Just a few words of caution. Sales are reported as a change from the same month, a year ago. It is important to know how strong sales actually were a year ago to make sense of this year's sales. In addition, sales are usually reported for "comparable stores" in case of company mergers.

 

ADP Employment Report
8:15 ET

Definition
The ADP national employment report is computed from a subset of ADP records that in the last six months of 2006, represented approximately 364,000 U.S. business clients and approximately 22 million U.S. employees working in all private industrial sectors. The data are collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments. ADP contracted with Macroeconomic Advisors to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic's employment situation. The ADP report only covers private (excluding government) payrolls at this time. (Automatic Data Processing (ADP)/Macroeconomic Advisers)

Why Do Investors Care?
Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have certainly improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the new ADP national employment report can help improve the payroll forecast by providing information in advance of the employment report.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus. Initially, the ADP national employment report will not have wage information, but their goal is provide wage information, along with industry and regional information as well.

Nonetheless, by tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.

ISM Mfg Index
10:00 ET
Consensus: 36.0
 
Definition
The Institute for Supply Management surveys more than 300 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where readings above (below) 50 percent indicate an expanding (contracting) factory sector. Export orders, import orders, backlog orders and prices paid for raw and unfinished materials are also measured, but these are not included in the overall index. (Institute for Supply Management)

Why Do Investors Care?
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provides insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report that helps it to determine the direction of interest rates when inflation signals are flashing in these data. As a result, the bond market is highly sensitive to this report.

Market Consensus Before Announcement
The Institute for Supply Management's manufacturing index edged 2 tenths higher in February to a 35.8 level that is only modestly above December's low of 32.9. Looking ahead, readings on new and unfilled orders were stable in February but deeply in negative territory at 33.1 and 31.0, respectively. This would indicate little improvement in the near term for the overall index.

The ISM manufacturing index (formerly known as the NAPM Survey) is constructed so that any level at 50 or above signifies growth in the manufacturing sector. A level above 43 or so, but below 50, indicates that the U.S. economy is still growing even though the manufacturing sector is contracting. Any level below 43 indicates that the economy is in recession.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/2 2/2 3/2 4/1 5/1 6/1 7/1 8/3 9/1 10/1 11/2 12/1 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Construction Spending
8:30 AM

Consensus:-1.5%

Definition

The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.

Why Do Investors Care?

Construction spending has a direct bearing on stocks, bonds and commodities because it is a part of the economy that is affected by interest rates, business cash flow and even federal fiscal policy. In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends.

Businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home.

A portion of construction spending is related to government projects such as education buildings as well a highways and streets. While investors are more concerned with private construction spending, the government projects put money in the hands of laborers who then have more money to spend on goods and services.

That's why construction spending is a good indicator of the economy's momentum.

Market Consensus Before Announcement
Construction spending in January fell at a faster pace, declining a monthly 3.3 percent in January, after dropping 2.4 percent the month before. Weakness in January was led by a sharp 4.3 percent plummet in private nonresidential outlays. The private residential component also declined and by 2.9 percent while public outlays rebounded 0.6 percent. Looking ahead, we may get a small bump up in residential spending due to a rebound in housing starts. But outlays are based on lagged effects from several months of starts, so don't expect much of a rise in residential outlays. Also, businesses and state and local governments are cutting back on new construction when possible due to revenue issues.

Over the last year, a decline in residential outlays has pulled down year-on-year growth for overall construction outlays. Nonresidential and public outlays are positive with nonresidential actually strong.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/5 2/2 3/2 4/1 5/4 6/1 7/1 8/3 9/1 10/1 11/2 12/1 Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Pending Home Sales Index
10:00ET
 
Definition
TThe National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. As such, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale.

Why Do Investors Care?
This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the pending home sales index which measures home resales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies

 

EIA Petroleum Status Report (Pay attention to this one)
10:30 ET

Definition
The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. The level of inventories helps determine prices for petroleum products.

Why Do Investors Care?
Petroleum product prices are determined by supply and demand - just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in crude oil prices - or price increases for a wide variety of petroleum products such as gasoline or heating oil. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. During a period of sluggish economic activity, demand for crude oil may not be as strong. If inventories are rising, this may push down oil prices.

Crude oil is an important commodity in the global market. Prices fluctuate depending on supply and demand conditions in the world. Since oil is such an important part of the economy, it can also help determine the direction of inflation. In the U.S. consumer prices have moderated whenever oil prices have fallen, but have accelerated when oil prices have risen.

 

 

Thursday April2nd

Monster Employment Index
06:00ET

Definition
Monster collects job postings from 1,500 web sites (including Monster.com) and creates an index of job availability, akin to The Conference Board's help wanted index. The difference between the two is that one collects help wanted advertising from newspapers and the other collects from online posting. The Monster index is not seasonally adjusted.

Why Do Investors Care?
In addition to providing insight on the general strength of the economy, this report gives a sense of how many jobs employers are trying to fill. If that number is relatively high, it could mean there is a shortage of available workers and companies may have to offer higher wages to attract them. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always worried about the potential for inflationary pressures.

When the employment index measuring job availability is falling, this bodes well for the bond market because it implies a drop in labor demand and perhaps an economic downturn. While the Fed worries about inflation, they also are concerned about rising unemployment. A rising jobless rate can mean a more accommodative monetary policy.

The equity market prefers to see healthy economic growth and thus would rather see increases in the employment index. An increase in job demand means that consumers will have more money to spend on goods and services - and this ultimately affects profits.

Jobless Claims
08:30ET ET
Consensus 650K

Definition
New unemployment claims are compiled weekly to show the number of individuals who filed for unemployment insurance for the first time. An increasing (decreasing) trend suggests a deteriorating (improving) labor market. The four-week moving average of new claims smoothes out weekly volatility.

Why Do Investors Care?
Jobless claims are an easy way to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more have jobs, and that tells investors a great deal about the economy. Nearly every job comes with an income that gives a household spending power. Spending greases the wheels of the economy and keeps it growing, so a stronger job market generates a healthier economy.

There's a downside to it, though. Unemployment claims, and therefore the number of job seekers, can fall to such a low level that businesses have a tough time finding new workers. They might have to pay overtime wages to current staff, use higher wages to lure people from other jobs, and in general spend more on labor costs because of a shortage of workers. This leads to wage inflation, which is bad news for the stock and bond markets. Federal Reserve officials are always on the look out for inflationary pressures.

By tracking the number of jobless claims, investors can gain a sense of how tight, or how loose, the job market is. If wage inflation threatens, it's a good bet that interest rates will rise, bond and stock prices will fall, and the only investors in a good mood will be the ones who tracked jobless claims and adjusted their portfolios to anticipate these events.

Just remember, the lower the number of unemployment claims, the stronger the job market, and vice versa.

Market Consensus Before Announcement
Initial jobless claims slipped in the latest week but that was not the big story. Continuing jobless claims for the March 7 week rose a very steep 185,000 to a record 5.473 million. The worsening recession is making it harder for the jobless to find new work. Initial claims for the March 14 week did fall back 12,000 but remained at a very high 646,000 for a four-week average of 654,750. Lackluster demand in the economy is likely to result in rising layoffs for some time.

Weekly series fluctuate more dramatically than monthly series even when the series are adjusted for seasonal variation. The 4-week moving average gives a better perspective on the underlying trend.

Data Source: Haver Analytics  

Factory Orders
14:00 ET 
 
Definition
Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month.

Why Do Investors Care?
Investors want to keep their fingers on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth which is less likely to cause inflationary pressures. By tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios.

The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production. All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments.

Market Consensus Before Announcement
Factory orders fell 1.9 percent in January. Helping ease the decline was 0.5 percent boost in nondurable orders - a gain tied to higher oil prices. Looking ahead, we should see a smart rebound in February as durable goods orders rebounded a strong 3.4 percent in February. Further gains in oil prices also should boost the nondurables component.

Even though monthly shipment data fluctuate less than new orders, both series show underlying trends more clearly by looking at year-over-year changes. In 2005 for example,new orders rose more rapidly than shipments due to large gains in aircraft orders. Aircraft orders have a long lead to shipment.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/6 2/5 3/5 4/2 5/1 6/3 7/2 8/5 9/2 10/2 11/3 12/4 Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

 

EIA Natural Gas Report
10:35 ET

Definition
The Energy Information Administration (EIA) provides weekly information on natural gas stocks in underground storage for the U.S., and three regions of the country. The level of inventories help determine prices for natural gas products.

Why Do Investors Care?
Natural gas product prices are determined by supply and demand - just like any other good and service. During periods of strong economic growth, one would expect demand to be robust. If inventories are low, this will lead to increases in natural gas. If inventories are high and rising in a period of strong demand, prices may not need to increase at all, or as much. During a period of sluggish economic activity, demand for natural gas may not be as strong. If inventories are rising, this may push down oil prices.

 

 

Friday April 3rd

Employment Situation
08:30 ET

 

Definition
The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. (Bureau of Labor Statistics, U.S. Department of Labor)

Why Do Investors Care?
If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions are dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.

The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.

By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.

Market Consensus Before Announcement
Nonfarm payroll employment in February plunged 651,000, following a decline of 655,000 in January and a fall of 681,000 in December. Job cuts in the latest month were widespread in both service-providing and goods-producing sectors. The soft labor market has weakened wage gains as average hourly earnings rose a modest 0.2 percent in February. Also, the average workweek was unchanged at an anemic 33.3 hours. From the household survey, the civilian unemployment rate surged further to 8.1 percent from 7.6 percent in January - hitting the highest rate in 25 years. Looking ahead, record high continuing unemployment claims indicate that the unemployment rate will rise even further in March.
 

During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month.

Data Source: Haver Analytics  

The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/9 2/6 3/6 4/3 5/8 6/5 7/2 8/7 9/4 10/2 11/6 12/4 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

 

ISM Non-Mfg Survey
10:00ET

Definition
The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. Beginning with the January 2008 report, a new composite index was made public and is now the headline number. It is considered an indicator of the overall economic conditions for the non-manufacturing sector and consists of four equally weighted indexes: business activity, new orders, employment, and supplier deliveries.

Why Do Investors Care?
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data like the ISM non-manufacturing survey's business activity index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly-and causing potential inflationary pressures.

The ISM manufacturing index has a long history - dating to the 1940s. This new report (beginning in 1998) was originally not adjusted for seasonal variation, but the ISM has since established seasonally adjusted figures for several of the ISM non-manufacturing components (including the business activity index) since 2002 and a composite index starting in 2008. As a result, the ISM non-manufacturing survey has garnered more attention and is almost as widely followed by financial market participants as its manufacturing cousin.

Market Consensus Before Announcement
The composite index from the ISM non-manufacturing survey fell 1.3 points in February to a 41.6 level that indicates accelerating contraction through the bulk of the economy. The business activity index, equivalent to a production index, fell a very steep 4 points to 40.2 from January's 44.2. Looking ahead, the new orders index also deteriorated in February to 40.7, indicating further deterioration ahead.
 

The ISM non-manufacturing survey does not compile a composite index like its manufacturing cousin. The business activity index, which is actually akin to the production index in the manufacturing survey, is widely followed as the key figure from this survey.

Data Source: Haver Analytics  

2009 Release Schedule

Released On: 1/6 2/4 3/4 4/3 5/5 6/3 7/6 8/5 9/3 10/5 11/4 12/3 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

 

 

SPEECHES

12:00PM

Federal Reserve Chairman Ben Bernanke delivers closing keynote address to Richmond Fed Bank's 2009 Credit Markets Symposium in Charlotte, NC.

 

 

That's it for this week,

Trade safely

 

Yours truly,

 

 

Eric LeRiche

http://www.InvestorRules.com

 

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