Sunday, September 22, 2013

The Week Ahead: Washington plus

A potpourri of economic reports seasons a market week that will likely pay greater attention to the fast approaching earnings season and federal budgetary politics.

Alcoa Inc. (AA)'s earnings announcement, scheduled for Oct. 8, typically kicks off the earnings season flood, and the markets and their camp followers are very much engaged in trying to guess what the many corporate financial results will be, with each forecast impacting prices, sometimes to an extraordinary degree.

Meanwhile, in Washington, the U.S. Senate takes up a spending bill in a dispute with the House that, rhetorically at least, threatens a government shutdown when the present budgetary authority runs out next week. There will also be much speculation about whether Congress will block adjustment of the debt ceiling rather than forcing the government into default, with rapid and apocalyptic results.

Compared to those events, the economic reporting, while not small potatoes, tends to fade a bit.

Durable goods orders will be released at 8:30 a.m. New York time, opening a window into the confidence corporate managers and ordinary consumers have in their ability to pay for big-ticket items.

Another window into what people are doing with their money, the personal income and outlays report, will be opened at 8:30 a.m. Friday. A bit of subtraction provides a third key figure, the savings rate, an important item in light of the widely held view that consumer spending alone can add momentum to the recovery.

The housing sector also gets a moment in the spotlight with the release of  new home sales on Wednesday at 10 a.m.  New homes are the smaller portion of the housing sector, being dwarfed by existing homes sales, which were reported last week.

Finally, the government takes a third and final try at estimating the 2nd quarter gross domestic product, releasing the report on Tuesday at 8:30 a.m. A significant revision from previous estimates will have a market impact because of its influence on future Federal Reserve bond purchasing decisions.

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

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

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

Other reports of interest:

Monday: Purchasing Managers' PMI manufacturing index flash report, just before 9 a.m.

Tuesday: S&P Case-Shiller home price index at 9 a.m. and consumer confidence at 10 a.m.

Wednesday: Petroleum inventories at 10:30 a.m.

Thursday: Pending home sales index at 10 a.m.


Five Federal Open Market Committee members are scheduled to speak: Kansas City Fed Pres. Esther George on Tuesday and Thursday, Fed Gov. Jeremy Stein on Thursday and Chicago Fed Pres. Charles Evans, Boston Fed Pres. Eric Rosengren and New York Fed Pres. and FOMC Vice Chair William Dudley on Friday.

Three FOMC alternates will take the podium: Dallas Fed Pres. Richard Fisher on Monday, Cleveland Fed Pres. Sandra Pianalto on Tuesday and Minneapolis Fed Pres. Narayana Kocherlakota on Thursday.

Atlanta Fed Pres. Dennis Lockhart, who holds no FOMC position this year, will make a public appearance on Monday.

Analytical universe

This week I shall be analyzing new bull and bear signals among 2,382 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter. My universe is selected from mid-cap stocks and larger, defined as market capitalization of $1 billion and greater.

Trading calendar

By my rules, I'm trading October options for the short legs of vertical, diagonal and calendar spreads and covered calls, and for all legs of butterfly spreads and iron condors. I'm trading January options for single calls and puts as well as straddles. Shares, of course, are good at any time.

Good trading!

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