Saturday, April 27, 2013

The Week Ahead: Income, money and jobs

A busy week for economic events, from income on Monday to jobs on Friday with the Fed and much more in between. Everything this week will be framed by last week's gross domestic product report for the 1st quarter, which came in at 2.5%, within the consensus range but below the consensus level.

Some blame the poor performance on federal spending cuts ordered by Congress' budget sequester. The Washington Post wrote about that claim in a news report published Friday.

The personal income and outlays report will be published Monday at 8:30 a.m. Eastern. It is important in part as a window into the hearts and minds of consumers, who hold the future of the recovery in their hands. Subtract outlays from income and you get savings, and the more consumers save, the slower the recovery will be.

(Am I alone in remembering those happy days in the '90s when people in authority would emerge periodically to scold Americans for saving too little? Bet they wish they could take those words back now.)

The Federal Open Market Committee meets to set monetary policy on Wednesday and will announce their decision, or lack of, at 2 p.m. Arguably, the awful GDP report is a strong reason to think that the Fed won't come close to ending its loose-money policy anytime soon.

The Institute of Supply Management's manufacturing index is also out on Wednesday, at 10 a.m. and look for international trade on Thursday.

On Friday the employment report, including the politically important unemployment rate, at 8:30 a.m. caps the week. It also has a strong link to the sequester, since less government spending means fewer jobs. Anything below six digits will prompt scare stories. The usual sneak preview, the ADP employment report released by the payroll services company, will be out at 8:15 a.m. Wednesday.

Leading indicators (in descending 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, at 4:30 p.m. Thursday.

The average hourly workweek in manufacturing from the employment report, at 8:30 a.m. Friday.

Manufacturers new orders for consumer goods and materials from the factory orders report, Friday at 10 a.m.

Vendor performance (the deliveries times index) from the ISM manufacturing survey, at 10 a.m.  Wednesday.

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

Average weekly initial jobless claims, at 8:30 a.m. Thursday.

Manufacturers' new orders for nondefense capital goods from the factory orders report, at 10 a.m. Friday.

Other reports of interest:

Monday: Pending home sales at 10 a.m., and the Dallas Federal Reserve Bank manufacturing survey of conditions in Texas, at 10:30 a.m.

Tuesday:  The employment cost index at 8:30 a.m., the SYP Case-Shiller home price index, which gives stats for individual metro areas, at 9 a.m., the Chicago purchasing managers index at 9:45 a.m., and the Conference Board's consumer confidence survey at 10 a.m.

Wednesday: Motor vehicle sales throughout the day, the Purchasing Managers manufacturing index shortly before 9 a.m., construction spending at 10 a.m. and  petroleum inventories at 10:30 a.m.

Thursday: Productivity and costs at 8:30 a.m.

Friday: Factory orders and the Institute of Supply Management non-manufacturing index, both at 10 a.m.

I also follow the Baltic dry index, released daily, tracking the volume of global maritime shipments of coal, iron ore, grain and other raw materials.

Analytical universe

This week I'll be analyzing new bull and bear signals among 4,136 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter.

Trading calendar

By my rules, we're entering that period when option spreads having short legs are disallowed. So, by the book, I'm trading August options for single calls and puts and for straddles. Of course, shares are good at any time.

Practically speaking, since I've had little chance to add new spreads in the past few weeks because of earnings season, I may well bend the rules and enter short vertical spreads, as opportunity allows.

My rules allow trading in June short spreads beginning May 3.

Good trading!

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