(Sorry so late this AM, busy morning oversight!)

Key Events This Week:

Monday:

9:00 - Richard Fisher, president of the Dallas Federal Reserve, speaks on challenges to economic growth to the Toronto Forum for Global Cities in Toronto.

• Treasury Auctions:
• 11:30 - 3-Month Bills
• 11:30 - 6-Month Bills

Tuesday:

9:00 - The S&P Case-Shiller Home Price Index last showed that house prices in 20 metropolitan areas were 4.1% lower than 12 months ago. Nine of the metro areas saw prices rise in July; the rest were down, but overall the the index has been flat for the past four months. Economists expect another flat month in August, which would bring the year-over-year index to -3.6%.

"Lower mortgage rates starting in August have provided support to housing prices despite the ongoing supply/demand imbalance that's been present for several years now," said Janney Capital Markets. "In fact, for a generic 30-year mortgage, the decline in average Fannie Mae rates from 4.28% in July to 3.79% in August translates into a 5.8% lower monthly payment, effectively making residential real estate more affordable by a similar margin."

Janney said price declines should be limited as a result.

10:00 - With stock markets on a tear since Oct. 3, economists expect Consumer Confidence will move upward this month, albeit modestly. The median estimate is 46.0, up from 45.4 a month before and 45.2 in August when the debt ceiling debacle and fears of a double-dip recession strangled sentiment.

"Hard data on the US economy continues to improve, but consumer confidence has been slow to react," said Nomura Global Economics. "We think household conditions were not quite as bad in October, despite lingering weakness in earlier released sentiment measures."

• Treasury Auctions:
• 10:00 - 4-Week Bills
• 1:00 - 2-Year Notes

Wednesday:

8:30 - New Orders for Durable Goods are expected to drop 0.7% in September, largely due to fewer orders from Boeing. But ex-transportation orders should advance 0.5%, and ex-aircraft orders could rise 2.2% on help from motor vehicle increases following supply disruptions earlier in the year. The headline drop would follow a 0.1% dip in August and a 4.2% jump in July.

Boeing, the aircraft manufacturer, took more $14 billion in orders in August, but only $8 billion in September, according to IHS Global Insight. 

"There should be a partial offset from machinery orders, because this should be a big month for turbine orders, based on recent seasonal patterns," Global Insight added.  "Two wild cards could moderate the overall drop: total aircraft orders have fallen short of Boeing's reported orders by a wide margin in each of the past two months and could catch up; and defense capital goods orders have been weak for three consecutive months and could spike."

Citigroup said core capital goods orders should grow at a healthy rate, while Janney Capital Markets said the auto industry trended strong and should cushion against falling aircraft sales. 

"Excluding transportation, however, the picture is growing increasingly muddled, as the most recent bug buyers of US-manufactured capital goods, developing economies, are beginning to see their internal growth rates fade somewhat," Janney said. 

10:00 - New Home Sales should do little this month. Economists look for an annual rate of 300k in September, almost an average of the 295k pace in August and the 302k rate in July. The trend should at least be upward though, thanks in part to low mortgage-rates.

"New home sales likely remained moribund in September," said Citigroup. "Pending sales data dipped and single-family starts and permits for the month showed no sign of improvement. New home sales are unlikely to pickup in the near term with so many near new homes currently on the market."

Janney Capital Markets said homebuilders are finally starting to capitulate on price. 

"After holding the line on pricing in a way that made newly built properties much more expensive than existing ones, builders began to offer better headline deals in July. In just the two months of data subsequent, the median price of new homes sold dropped 12.3%. That two month decline is the biggest price drop in the nearly fifty year history of new home sales data, a strong sign that builders are simply changing their strategy."

• Treasury Auctions:
• 1:00 - 5-Year Notes

Thursday:

8:30 - The first estimate for third-quarter GDP is expected to come in at 2.5%. Low? Yes. Yet that's nearly double the 1.3% rate in Q2 and the fastest growth since Q2-2010. The growth is coming from multiple areas - retail sales, job growth, and industrial production were stronger than anticipated, as Citigroup points out, while business investment and trade improved too.

"Some easing in gasoline prices, plus better availability of vehicles after the Japanese earthquake and related supply disruptions should help consumer spending grow about 2.0%, compared with only 1.3% in the second quarter," said IHS Global Insight. 

"But the best news should come from very sharp increases in business capital spending, both for equipment and structures, an important vote of confidence in the recovery," they added. "The better growth performance in the third quarter doesn't mean that the economy can't 'double-dip' back into recession, but it suggests that it has more momentum than there seemed to be just a month or two ago, and underscores that the primary recession risks are from external shocks, with Europe the biggest wild card."

Janney Capital Markets predicts just a 2.1% rate, but even that, they note, "would mean that the domestic economy grew by a wider margin in the third quarter alone than in the whole first half of the year."

8:30 - Initial Jobless Claims are expected to get a 2k trim to 401k in the week ending Oct 22. Last time, in the payroll survey week, the four-week average fell to 403,000, which compares quite favorably to September payroll survey week of 422,250.

"The data likely continued to signal possible improvement in other labor market indicators," said Citigroup. "Beneficiaries probably fell by about 40,000 leaving the insured rate unchanged at 2.9%."

• Treasury Auctions:
• 1:00 - 7-Year Notes

Friday:

8:30 - The Personal Income & Outlays report is anticipated to show incomes rising 0.3% in September and consumption climbing 0.6%. In August, income fell back 0.1% and consumption only grew 0.2%. The payrolls report suggested private wages and salaries are rising, and other reports indicate retail spending grew and including a jump in vehicle purchases.

"The consumer sector seemed to have bounced back sharply in September," said Citigroup. "The employment report featured gains in payrolls, the workweek and hourly earnings, signaling a jump in wages and salaries. Consumer spending probably posted a solid gain, led by a big rebound in motor vehicle purchases."

Meantime, the core PCE price index - the Fed's preferred inflation measure - is expected to increase 0.1% in September, putting the year-over-year rate at 1.7%

"Higher core inflation earlier this year is one reason that the Federal Reserve is being more cautious about adding more monetary stimulus than it was in 2010, when deflationary risks were high," IHS Global Insight said. "A 0.1% monthly pace of core inflation in September (just the same as in August), suggests that core inflation is abating."

9:55 - Consumer Sentiment is expected to rise just half a point from the mid-month reading to 58, although estimates from economists go as high as 62. The mid-month reading was a two-month low; back in May, the index was at 71.5.

"Consumer sentiment surprisingly declined in early October," said Nomura Global Economics. "Since that time, volatility in financial markets has remained elevated, but high-frequency labor market indicators have improved."

"Normally, factors such as jobless claims, gas prices and equity market performance tend to drive changes in consumer sentiment," Citigroup added. "But these factors have been poor predictors of attitudes lately. Instead consumer sentiment seems to be driven by more subjective forces, especially the perceived dysfunction in Washington."