With the S&P 500 improving 1.5% yesterday, Sal Guatieri from BMO Capital Markets noted that the index has seen its best five-month performance since 1938. The benchmark index crossed the 1,000 mark yesterday for the first time since November, but today futures are pulling it back down to 993, as sentiment is lower with the Zurich-based bank UBS reporting that losses were extended in the second quarter.
Two major bits of data are released this morning. Guatieri calls the first, personal income & outlays, anti-climatic, as the June figures were already reported in Q2 GDP last Friday.
“We already know that real consumer spending contracted 1.2% annualized in Q2, which likely flags a 0.3% drop in June (though revisions may say otherwise),” he said in a client note. “Personal income probably dropped 1.0% due to steep job losses, while the savings rate could slide to 4.6% from (a likely downwardly-revised) 6.9% in May.”
In addition to spending and income figures, the report also features the Fed’s preferred measure of inflation, called the core PCE deflator. It is expected to rise 0.2% in the month, putting the annual rate at +1.7%, three-tenths below the ideal rate.
Half an hour into the trading session markets will look at the pending home sales index, which is widely expected to advance for the fifth straight month.
Guatieri adds: “They have surged 44% annualized in the previous four months, suggesting the housing market has finally turned the corner.”
More Details on Today’s Key Releases:
8:30 ― Last month, the Personal Income & Spending report showed a huge 1.4% advance in income due to a temporary boost from the stimulus package, but most of that is expected to be wiped away in the report for June. Analysts expect income to fall 1.1% in the month, while consumer spending is expected to repeat its +0.3% performance.
“As the economy and job market remain weak, companies continue to implement unpaid furloughs, reduced work weeks and other measures that effectively reduce employee compensations,” add the economics team at BBVA. “Nevertheless, consumption is forecasted to increase modestly due to the increase in income inthe previous months and prospects of additional stabilization in the economy.“
10:00 ― The NAR’s Pending Home Sales Index is a forecasting tool of existing home sales, which looks at signed contracts for home sales yet to be finalized. In June the index is expected to climb 0.6%, following a 0.7% gain in May and giving further confirmation that stabilization is taking hold in the real estate market.
“Amid renewed demand for existing homes due to favorable home prices and increasing affordability, pending home sales are expected to increase for the fifth consecutive month,” note analysts at BBVA. “An increase would indicate that sales of existing homes would rise further in the upcoming months, which could, in turn, further slow the decline in home prices and decrease inventory levels.”