For the week of June 27th (in conjunction with Econoday):
Not much on the earnings docket this week so economic data will rule the price action. ISM reports and the monthly job’s report will dominate the headlines. Let’s see what’s on tap:
Personal Income and Outlays 8:30 AM ET
Personal income posted a solid 0.4 percent increase for April, matching the gain the month before. Importantly, the latest increase was in what really counts as the wages & salaries component advanced 0.4 percent after rising 0.3 percent in March. But overall, personal consumption was flat, following a 0.6 percent rise the prior month. The April decline in PCEs was led by a 0.6 percent drop in nondurables and was mostly price related. Inflation at the consumer level is still almost nonexistent. The headline PCE price index was unchanged in April—easing from up 0.1 percent in March. The core rate also was soft, gaining only 0.1 percent and matching both March and the consensus forecast. More recently, aggregate weekly earnings were up 0.6 percent in May, suggesting a nice boost in the wages & salaries component of personal income. But spending may be down. Retail sales excluding autos dropped 1.1 percent in May. However, unit new motor vehicle sales rebounded 3.8 percent for the month and should soften the overall decline in sales or even boost it. PCE inflation should be soft based on a 0.2 percent decline in May’s headline CPI and a 0.1 percent rise in the core CPI.
Personal income Consensus Forecast for May 10: +0.5 percent
Personal consumption expenditures Consensus Forecast for May 10: +0.2 percent
Core PCE price index Consensus Forecast for May 10: +0.1 percent
ICSC-Goldman Store Sales 7:45 AM ET
Redbook 8:55 AM ET
S&P Case-Shiller HPI 9:00 AM ET
Consumer Confidence 10:00 AM ET
The Conference Board’s consumer confidence index advanced to 63.3 in May, up notably from April’s 57.9. A big factor behind the improvement was greater optimism about the jobs market. The assessment of the jobs market has improved sizably for a third month with 43.6 percent describing jobs as currently hard to get, still a big number but well down from February’s 47.3 percent. If the confidence index tracks last week’s consumer sentiment index, we should see a modest rise for June.
Consumer confidence Consensus Forecast for June 10: 63.3
State Street Investor Confidence Index 10:00 AM ET
MBA Purchase Applications 7:00 AM ET
ADP Employment Report 8:15 AM ET
Chicago PMI 9:45 AM ET
The Chicago PMI eased to 59.7 for May from April’s 63.8 reading. But the latest figure was still far above break-even 50 to indicate month-to-month growth. We are likely to see a healthy reading for June based on the new orders index in May which came in at a robust 62.7.
Chicago PMI Consensus Forecast for June 10: 59.7
EIA Petroleum Status Report 10:30 AM ET
Motor Vehicle Sales
Sales of domestic light motor vehicles in May improved to 8.9 million units annualized from 8.5 million the month before. Most of the improvement was in light trucks which jumped 8.6 percent as domestic auto sales firmed only 0.2 percent. Domestic and import totals hit 11.6 million, following April’s 11.2 million.
Motor vehicle domestic sales Consensus Forecast for June 10: 8.9 million-unit rate
Monster Employment Index 6:00 AM ET
Jobless Claims 8:30 AM ET
Initial jobless claims fell back in the June 19 week, down 19,000 to 457,000. The four-week average also fell, though only by a very slight 1,500 to a 462,750 level that is still 5,000 higher than mid-May. The Labor Department was upbeat, saying a downward trend for the series has been re-established and noted that claims in the two preceding weeks were skewed higher by seasonal adjustment problems tied to the Memorial holiday. Looking ahead, it may be difficult to determine the underlying direction of claims as sharp cuts in temporary jobs for the 2010 Census may give claims a boost as some discharged temporary Census workers may be eligible for benefits.
Jobless Claims Consensus Forecast for 6/26/10: 450,000
ISM Mfg Index 10:00 AM ET
The composite index from the ISM manufacturing survey in May came in at 59.7—down slightly from 60.4 in April but still well above breakeven of 50. Based on the new orders index posting a strong 65.7 reading, the June composite should be healthy. However, more recent regional surveys have been mixed with the Philly Fed index for June slipping to 8.0 from 21.4 in May while the New York Fed manufacturing index improved to 19.57 from 19.11 in May (breakeven of zero for both regional surveys).
ISM manufacturing composite index Consensus Forecast for June 10: 59.0
Construction Spending 10:00 AM ET
Construction spending in April surged 2.7 percent, following a 0.4 percent rebound the month before. The April boost was led by a jump in private residential outlays which gained 4.4 percent after no change the prior month. Public outlays increased 2.4 percent in the latest month while private nonresidential construction rebounded 1.7 percent. Looking ahead, construction outlays are likely to soften—at least the residential component. Housing starts plunged 10.0 percent.
Construction spending Consensus Forecast for May 10: -0.5 percent
Pending Home Sales Index 10:00 AM ET
EIA Natural Gas Report 10:30 AM ET
Employment Situation 8:30 AM ET
Nonfarm payroll employment in May surged 431,000, following a 290,000 boost in April, and a 208,000 gain in March. The May boost was the largest since a 472,000 spike in March 2000. But according to the BLS, Census hiring added 411,000 temporary jobs to the payroll gain. Private nonfarm employment increased only 41,000, following a 218,000 boost in April. Average hourly earnings picked up with a 0.3 percent rise in May, following a 0.1 percent advance the month before. The average workweek for all workers edged up to 34.2 hours from 34.1 hours in April. The unemployment rate slipped to 9.7 percent from 9.9 percent in April. Some are already seeing Census layoffs turning the June payroll number negative. Once again, market focus will be on private payrolls to discount the Census effect. Ahead of the Friday release of June numbers, traders may reposition as data come out for ISM employment, ADP, Monster, and jobless claims.
Nonfarm payrolls Consensus Forecast for June 10: -100,000
Nonfarm private payrolls Consensus Forecast for June 10: -100,000
Unemployment rate Consensus Forecast for June 10: 9.8 percent
Average workweek Consensus Forecast for June 10: 34.2 hours
Average hourly earnings Consensus Forecast for June 10: +0.1 percent
Factory Orders 10:00 AM ET
Factory orders in April posted a 1.2 percent increase, following a 1.7 percent gain the prior month. The latest number included a slight downward revision to the advance durables orders figure to a 2.8 percent jump from the initial estimate of 2.9 percent. Nondurables orders for April edged down 0.1 percent after spiking 3.0 percent the month before. More recently, new orders for durables in May declined 1.1 percent after jumping a revised 3.0 percent in April.
Factory orders Consensus Forecast for May 10: -0.5 percent
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.