Welcome to the last week of 2010.

We have three Treasury note auctions, two Fed QEII coupon passes, some housing data, and a couple of regional manufacturing reports. Not much in the way of new data will print though and many market participants are out on holiday or focused on planning for the year ahead. Thus, trading volumes will be low and liquidity will be lacking. This means the chance for volatility is high.

Key Events in the Week Ahead..

Monday:

No significant data.

Treasury Auctions:
11:30 ― 3-Month Bills
11:30 ― 6-Month Bills
1:00 ― 2-Year Notes

Tuesday:

9:00 ― The S&P Case-Shiller Home Price Index showed that housing prices in the 20 metropolitan areas covered were just 0.5% above levels from last year. Nineteen of the 20 areas saw declines in the September index, with average prices sliding 0.8%. Economists expect prices to fall another 0.6% in October, marking the fourth straight decline.  Prices are already 28.6% below their July 2006 peak.

“The 20-city composite house price index hit an 18-month high in June but has declined about 1.5% over the last three months,” noted economists at Nomura Global Economics. “Declines in the median prices of both new and existing homes sold in October suggest the Case-Shiller index is likely to be down for fourth straight month.”

Economists at BBVA point out that prices are now both low and stable, “amounting to an attractive environment for potential home buyers.”  They said home prices are “expected to remain low but stable in the near future.”

10:00 ― Economists anticipate the Conference Board’s Consumer Confidence index to increase two points to 56.1 in December. A month before, the index jumped to the highest level since June. A gain this month would be the third straight one, but economists at BBVA point out we’re far away from the historical average of 94.7.

“Despite higher gasoline prices and a weak housing market, consumers are becoming more optimistic thanks to a rising stock market and relatively good news on the employment and income front,” said economists at IHS Global Insight. “Renewed consumer optimism, unleashing of pent-up demand, and heavy price discounting by retailers are encouraging strong holiday retail sales.”

10:15 ― Fed buys $6-8 billion in Treasuries maturing between 6/30/2013 and 11/30/3014

Treasury Auctions
11:30 ― 4-Week Bills
1:00 ― 5-Year Notes

Wednesday:

10:15 ― Fed buys $4-6 billion in Treasuries maturing between 6/30/2012 and 6/15/2013

Treasury Auctions:
1:00 ― 7-Year Notes

Thursday:

8:30 ― Initial Jobless Claims are anticipated to remain stable at 420k in the week ending Dec. 25. The four-week average last rose 2,500 to 426,000, breaking a six-week downward streak. That average is nearly 18k lower than the November payroll survey week, suggesting that the December employment report could be significantly stronger.

Economists at BBVA noted that initial claims remain elevated, but they are significantly lower than the March 2009 peak of 651k.

9:45 ― The Chicago Business Barometer climbed to 62.5 in November from 60.6 a month before, beating expectations as new orders jumped to 67.2. Any score above 50 indicates expansion. To end the year, the survey is expected to hold steady at 62.5, which would mark the fourth straight month above 60. It’s also the best score since April.

“The index has increased for the last fourteenth months,” said economists at BBVA. “The report indicates that production and new orders reached its highest level since February 2005 and 2007, respectively. While employment index marked a sixth month of growth, index for inventories dropped below 50 indicating contraction in employment in the region.”

10:00 ― The Pending Home Sales Index, which looks at mortgage contracts that have been signed but not finalized, thereby offering a look-ahead to the number of existing home sales, is expected to continue rising in November. The last index rose 10.4%, one of the largest monthly gains ever and a pace not expected to be repeated this month. Existing home sales correspondingly rose by 5.6% in November to an annualized rate of 4.68 million units.

Still, pending sales are down 22.4% from a year ago and activity remains depressed, said economists at Deutsche Bank.

“The outlook on housing will depend on the trajectory of the labor market,” they added. “If our forecast for an 8% unemployment rate by the end of next year proves correct, we are likely to see the worst of the housing market collapse behind us.”

Friday:

No significant data. Markets Close at 2pm.