Economists and traders will be very busy digesting tons of fresh information on the economy.
"Next week’s data release calendar is heavier than usual because it contains reports that were postponed due to the government shutdown," said Credit Suisse's Jay Feldman.
"October consumer and business surveys should be hit with government shutdown headwinds, but a gain in October vehicle sales should indicate consumer resilience. We look for another modest gain in September retail sales, moderate increases in September industrial production, and contained and subdued September CPI and PPI inflation reports. In addition, the questionable quality of the October official jobs report places a higher premium on next week’s October ADP employment report."
That questionable October jobs report release has been delayed to Nov. 8 from its originally scheduled release date of Nov. 1.
Here's your Monday Scouting Report:
- It Feels Like We'll Never See The Fed Taper: Economists and traders are increasingly talking about how the Federal Reserve may have missed its chance to taper its large-scale asset purchase program (aka QE). Last week, bond traders passed around a report from Medley Global Advisors titled "Fed: Ctrl-Alt-Delete." Medley analysts Regina Schleiger and Jeremy Torobin write that, "more than simply standing pat, the Federal Open Market Committee has effectively hit the reset button and is back where it was six months ago — at the very start of a long process of building the case for a downward adjustment to the Large-Scale Asset Purchase program.
"The witch's brew of a labor market that was weaker even before the shutdown and debt-ceiling drama, growth that has disappointed and which was supposed to be accelerating already, and price gains so persistently meager that disinflation could soon take on a central role in the FOMC conversation, mean the bar for any change is higher than it has been for some time."
- Industrial Production (Monday): Economists estimate that production grew 0.4% in September. "Auto assemblies pulled back slightly after surging to a six-year high in August, and manufacturing payrolls and hours were little changed in the employment report, so we look for only a 0.1% uptick in factory production," said Morgan Stanley's Ted Wieseman. "A rebound in utility output after substantial weather-related weakness in recent months and another good gain in drilling should boost headline IP."
- Pending Home Sales (Monday): Economists estimate that sales were flat month-over-month in September. "The gradual rise in interest rates likely played a role in slowing sales in August and likely will keep the bounce back in pending sales restrained in September," said Wells Fargo's John Silvia. "Going forward, many analysts will be watching the existing housing market indicators now that interest rates are beginning to drop again. The short-term pull back in rates could help to support slightly better sales numbers in the coming months."
- Dallas Fed Manufacturing Activity (Monday): Economists estimate that the regional index fell to 9.0 in October from 12.8 in September.
- Producer Price Index (Tuesday): Economists estimate that PPI inflation climbed 0.2% in September, and 0.1% excluding food and energy prices.
- Retail Sales (Tuesday): Economists estimate that sales were flat in September, but up 0.5% excluding autos and gas. "Core details should look better than the headline, which should be held back by a drop in auto sales," said Credit Suisse's Alex Lebwohl. "On the upside, we look for a pick-up in food sales and a rebound in both building materials and clothing after declines last month."
- S&P/Case-Shiller Home Prices (Tuesday): Economists estimate that home prices climbed 0.6% in September.
- Consumer Confidence (Tuesday): Economists estimate that the Conference Board's measure fell to 75.0 in October from 79.7. "Our expectation is that consumer confidence fell again in October as the federal government shutdown and debt ceiling fight began to weigh on consumers," said Wells Fargo's Silvia. "This erosion in consumer confidence would be consistent with the drop in confidence after the last debt ceiling debate in August 2011. Over the next few months we expect the pace of consumer spending to downshift slightly given the gradual erosion in consumers’ expectations about future conditions."
- Monthly Budget Statement (Tuesday): Economists forecast a budget surplus of $67.0 billion.
- ADP Employment Change (Wednesday): Economists expect ADP to report a 150,000 increase in private payrolls in October.
- Consumer Price Index (Wednesday): Economists estimate that CPI increased by 0.2%, and also 0.2% excluding food and energy prices. "Gasoline prices at the pump were little changed and should not be a swing factor," said Credit Suisse's Lebwohl. "Core should round up to 0.2%, as in recent months, supported by rents, firmer used vehicle prices, and a turnaround in hotel rates and airfares after a recent soft run."
- Federal Open Market Committee Meeting (Wednesday): The FOMC updates us on monetary policy at 2 p.m. ET. Economists expect no change in rates and no tapering of its $85 billion large-scale asset purchase (LSAP) program. There is no post-meeting press conference or forecast updates scheduled.
- Initial Unemployment Claims (Thursday): Economists estimate jobless claims fell to 340,000. "As the partial federal government shutdown ended in the third week of October, we anticipate few if any additional claims from non-federal workers and contractors," said Citi's Peter D'Antonio. "Claims may still be at the mercy of the California backlogs, which have plagued the data since early September – inflating the four-week moving average."
- Chicago PMI (Thursday): Economists estimate the regional PMI reading for October slipped to 55.0 in October from 55.7. "We look for the Chicago purchasing managers’ index to remain roughly unchanged in October, in a relatively solid range," said Citi's D'Antonio. "However, we are well aware that the Chicago index tends to jump around a lot. This year the swings have been enormous (and seemingly unrelated to actual changes in activity)."
- Markit U.S. PMI (Friday): Economists estimate U.S. PMI registered at 51.1 in October.
- ISM Manufacturing Index (Friday): Economists estimate that the ISM index fell to 55.0 in October from 56.2. "We expect the index to pull back slightly in October to 55.2, as the government shutdown, along with fears around the debt ceiling debate, begin to weigh on business confidence and thus new order activity," said Wells Fargo's Silvia. "While we still expect industrial output to increase in the current quarter, the upside potential likely has been limited by the fiscal policy uncertainty of the past few weeks. This uncertainty is expected to continue given the short-term nature of the deal to end the federal shutdown."
- Vehicle Sales (Friday): Economists estimate the pace of vehicle sales accelerated to 15.4 million units at an annualized rate. "[I]ndustry surveys indicate that increased consumer caution during the government shutdown led to weak sales results in the first half of the month," said Morgan Stanley's Wieseman. "Retail demand appears to have improved significantly after the shutdown ended, and fleet sales picked up, but with the weak start only a modest rebound in sales for the month as a whole is expected."
Page 2 of 2 - Market Commentary
The stock market established new all-time highs last week. And for the most part, Wall Street's top strategists are still bullish.
"We remain comfortable being “slow buyers of equities” even as the market remains close to all-time highs," said JP Morgan's Tom Lee.
"Despite the doomsayers the worriers and those calling curtains on the rally, our clients continue to believe, as do we, the bias is to the upside for now," said BTIG's Dan Greenhaus. "If the central bank stays accommodative and earnings keep doing what they’re doing, why not?"