Sunday, July 29, 2012

The Week Ahead: FOMC, employment, income

The week's economic reporting will be dominated by the Federal Open Market Committee meeting, with employment and personal income and outlays running a close behind.

The Fedsters who set monetary policy are facing a slowing in economic growth. The question is how far will they go to re-heat the economy, beyond the long-term bond swaps that are presently the main method.

The term we'll be reading a lot in the covering is QE3, which always sounds to me like large British ocean liner but actually stands for the third round of quantitative easing, where the Fed buys assets from banks.

The FOMC announcement will come Wednesday at 2:15 p.m. Eastern. No news conference this time around.

One of the inputs to the committee's deliberations is the government's monthly employment report, which has showed tepid job creations and stubbornly high unemployment rates. The report for July will be released on Friday at 8:30 a.m.

The employment report comes with a prelude: The ADP employment report from the large payroll company Automated Data Processing will be out Wednesday at 8:15 a.m. and is treated as a sneak preview of the government's figures.

Personal income and outlays -- what we made vs. what we spent -- will be reported Tuesday at 8:30 a.m. Much of the economy's angst have the past few years has been due to people saving their money rather than spending it. It is this report that contains numbers used to calculate the savings rate.

Leading indicators out this week:

The vendor performance (deliveries times index) is reported in the Institute of Supply Management's manufacturing index, out at 10 a.m. Wednesday.

Manufacturers' new orders for consumer goods and materials and new orders for nondefense capital goods are part of the factory orders report, at 10 a.m. Thursday.

Average weekly initial jobless claims will be reported at 8:30 a.m. Thursday.

The average hourly workweek in manufacturing is part of the employment report, Friday, 8:30 a.m.

Friday: The index of consumer expectations from the Reuters/University of Michigan consumer sentiment report, at 9:55 a.m.

Traders should also keep an eye on these financial leading indicators: The M2 money supply, out Thursday at 4:30 p.m. from the Federal Reserve, and two reported continually during market hours: The S&P 500 index and the interest rate spread between 10-year Treasuries and the federal funds rate.


Also, I like to keep an eye on the Baltic dry index of world shipping, updated daily.

Other reports of interest:

Monday: The Dallas Fed's manufacturing survey at 10:30 a.m.

Tuesday: The employment cost index (what employers pay workers) at 8:30 a.m., the Chicago purchasing managers' index at 9:45 a.m. and the Conference Board's consumer confidence report at 10 a.m.

Wednesday: Auto sales throughout the day, construction spending at 10 a.m. and petroleum inventories at 10:30 a.m.

Friday: The Institute of Supply Management's non-manufacturing index at 10 a.m.


Trading calendar

By my rules, as of Monday I can trade October single options and straddles. Of course, shares are good at any time.

Good trading!

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