Sunday, November 11, 2012

The Week Ahead: Inflation, retail, industry, cliff...

The week will be dominated by two events: The end of World War I and the beginning of the Battle of the Fiscal Cliff.

In between, look for some reports of market influence on inflation, retail and industry in a week distorted by a semi-holiday of global impact.

Sunday marks the 94th anniversary of the end of World War I. Since then, as the Great War has faded into history, the original Armistice Day has morphed into several successor holidays, with various degrees of observance.

In the United States, Veterans Day will be observed on Monday, with banks and bond markets closed. Stocks and options, however, will be traded in New York and Chicago on the regular schedule.

In London and Sydney, Remembrance Day is observed with ceremony but is not a public holiday, so those markets will be open for trading.

And in Tokyo, the day is of no particular significance and it will be just another session of the markets.

Two big U.S. economic reports will hit simultaneously at 8:30 a.m. Wednesday. The producer price index tracks the cost of stuff used in production, and retail sales is sort of a back-bearing on consumers' willingness to shop till they drop.

Of course, December's report on November retail sales will be far more interesting, since it will capture Black Friday, the start of the Christmas shopping season that, stores hope, will wash away the red ink and put them all in the black.

The most followed inflation report, the consumer price index, will be relased the next day, Thursday, at 8:30 a.m.

The industrial production report, out Friday at 9:15 a.m., will cap the week.

Friday is also the last day for November options to trade before expiring.

Potentially of greater financial significance than all the econ reports put together, the U.S. Congress' lame duck session begins on Tuesday, with lawmakers facing the task of finding a solution to the set of self-imposed mandatory and draconian budget cuts known as the Fiscal Cliff.

Leading indicators out this week (in order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, out Thursday at 4:30 p.m. from the Federal Reserve.

The S&P 500 index, reported continually during market hours.

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

Other reports of interest:

Tuesday: Treasury budget at 2 p.m., showing the federal budget deficit.

Wednesday: Federal Open Market Committee minutes of the Oct. 24 meeting, at 2 p.m. The FOMC has been so open under Chairman Bernanke that the minutes have had far less impact than they did under more secretive Fed regimes.

Thursday: The Empire State manufacturing survey of New York enterprises at 8:30 a.m., the  Philadelphia Fed Survey of business conditions in the mid-Atlantic region at 10 a.m., and petroleum inventories at 11 a.m.

Friday: Treasury's international capital report at 9 a.m., tracking capital flows between the domestic U.S. economy and abroad.

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


San Francisco Fed Pres. John Williams speaks Wednesday, Richmond Fed Pres. Jeffrey Lacker on Thursday, and Atlanta Fed Pres. Dennis Lockhart on Friday. All are members of the Federal Open Market Committee.

Trading calendar

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

Good trading!

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