The week ahead is a particularly slow one. The only major releases are the Trade Balance on Wednesday and Retail Sales report on Thursday. Plus, Friday will see February’s first measure of consumer confidence.
With little fresh data to anticipate, the fear is that markets will continue on their downward path this week. Since January 19 the Dow has shed 5.6% while the S&P 500 has lost 6.9%.
One hour before the opening bell, however, equity markets are looking stable. Dow futures are up 10 points to 10,012 and S&P 500 futures are up 3.08 points to 1,066.
Meantime, WTI Crude oil is starting the week 15 cents higher at $71.34 per barrel and Spot Gold is up $1.90 to $1,068.20. The US dollar, by contrast, is lower against the majors after hitting the highest level since the summer of 2009 last Friday.
In news from the weekend, Treasury Secretary Timothy Geithner told ABC’s This Week the U.S. will “absolutely not” lose its AAA-rating. “That will never happen to this country,” he added.
The Week Ahead...
Monday:
No significant data released.
Treasury Auctions:
- 11:30 ― 3-Month Bills
- 11:30 ― 6-Month Bills
Tuesday:
10:00 ― After climbing 1.5% in November, Wholesale Inventories are expected to maintain the direction but not the speed in December. Economists expect to see inventories move up 0.5% in the month and then continue to build in the coming months.
“Headline sales and inventories have been boosted by rising prices for energy and farm products, but these effects should be smaller in December,” added Ian Shepherdson from HFE.
Treasury Auctions:
- 11:30 ― 4-Week Bills
- 11:30 ― 52-Week Bills
- 1:00 ― 3-Year Notes
Wednesday:
8:30 ― The Trade Balance is expected to improve in December with help from a steady stream of exports. Imports should also rise, in part due to rising oil prices, but most economists believe the advance won’t outpace exports. In November the deficit widened to $36.4 billion from a $33.2 billion, and in December the consensus expectation is to see a narrowing to $35.7 billion.
Economists from BMO added: “Trade is expected to support the recovery again in Q1, with GDP growth pegged at 3%.”
Not all economists agree, however. Ian Shepherdson from HFE expects import volumes to rise more than exports “as the sharp U.S. inventory correction pulls in both finished goods and raw materials from overseas.” He added, “Foreign trade was a plus for GDP growth in the fourth quarter, but will probably be a drag on growth in the first quarter.”
10:00 ― Senate Banking Committee hearing on "Unwinding Emergency Federal Reserve Liquidity Programs and Implications for Economic Recovery". Ben Bernanke will share his thoughts on how the Federal Reserve plans to back out of financial markets.
12:45 ― Charles Plosser, president of the Philly Fed, speaks on lessons of the financial crisis to the World Affairs Council of Philadelphia.
2:00 ― Following a record December deficit of $92 billion, a majority of economists expect the Treasury’s Budget Statement to show a gap of $46.0 billion in January, with estimates ranging from $45 billion to $75 billion. So far, this fiscal year’s deficit is outpacing last year’s record.
“We expect the Treasury to record a budget deficit of $68bn for January,” predicted analysts from Nomura Global Economics. “Historically the government has run a surplus in January due to quarterly tax payments from individuals [but] weak receipts and the increase in transfer payments suggest a likely deficit for a second consecutive year. Outlays for the Troubled Asset Relief Program (TARP) were likely down from 2009 but non-TARP outlays should be boosted by various stimulus-related payments. Unemployment insurance benefits in particular remain a major drain on government coffers.”
Treasury Auctions:
- 1:00 ― 10-Year Notes
Thursday:
8:30 ― The week’s biggest release, Retail Sales, could bring some comfort to markets. Although auto sales were weak in the month and will pull the back the headline figures, economists are still predicting a 0.5% gain in the month, based on positive results from department stores and rising oil prices.
“Chain store sales registered a moderate gain in January, with notable strength at apparel and high-end department stores,” said analysts at IHS Global Insight. “Rising gasoline prices (up nearly 4% in January) should inflate service station sales.”
8:30 ― The four-week moving average for Initial Jobless Claims ticked up for the third consecutive week, rising to 468K from 457K last Thursday when the prior week’s claims number unexpectedly shot up to 480k. A decline to 467k is expected in the week ending February 6, but that’s unlikely to garner much praise as any figure above the 400k mark is indicative of overall job losses in the economy.
“While we are not overly convinced job destruction is beginning to pick back up, the current level of claims is consistent with sluggish job destruction, suggesting that if job gains do come, they will be limited,” said analysts from TD Securities. “Additionally, the recent upward momentum in the four-week moving average does deflate the optimistic bubble somewhat, though we do believe the worst of job destruction is firmly behind us.”
Treasury Auctions:
- 1:00 ― 30-Year Bonds
Friday:
10:00 ― In January, Consumer Sentiment moved up by 1.9 points to 74.4, the highest level since in 12 full months. Economists expect some marginal advance to 75.0 this month, but those hopes―while tepid―should be tempered considering last week’s employment report and the recent dread in financial headlines. Still, the index is looking favorable compared to the cyclical low of 56.3 seen last February.
“We expect confidence to continue to gradually recovering along with the broader economy over the coming months,” said analysts from Nomura. “If the slide in the stock market continues, however, the steady improvement in confidence could stall for a time.”
