Just when traders were giving up hopes on stimulus, a letter by Federal Reserve Chairman Ben Bernanke to Republican Representative Darrell Issa served to allay fears. In the letter released by the Wall Street Journal, Bernanke delved on additional scope for Fed easing, rekindling dying stimulus hopes, even though it was nothing new from the central bank's recent stance of 'standing ready to support if situation warrants.' Will Bernanke go a step further in his Jackson Hole address and shed more clarity on the course of policy action? Most economists do not harbor high hopes concerning Fed stimulus, given the deleterious impact it can have on commodities.
With most commodities denominated in dollars, additional QE would mean higher commodity prices, given the inverse relation commodities share with the dollar. Additionally, the domestic economy is still cruising along at levels that could be far from being called anemic. Housing and job markets have achieved a modicum of strength. The equity market exuberance that has defied economic fundamentals may also deter any resuscitation measure. At this juncture, the European Central Bank's move could be more market impacting rather than what the Fed would do.
Confirming the positive turn in the housing market, the National Association of Realtors reported that existing home sales rose 2.3 percent month-over-month to a seasonally adjusted annual rate of 4.47 million units in July. Sales rose in all regions, with the exception of the West, where sales remained unchanged. The median price of an existing home rose 9.4 percent year-over-year to $187,300. Inventories measured in absolute numbers rose slightly to 2.4 million units, while inventories measured in terms of months of supply fell to 6.4 months from 6.5 months in June.
Meanwhile, the Commerce Department said new home sales rose 3.6 percent month-over-month to a seasonally adjusted annual rate of 372,000 in June. Inventories measured in terms of months of supply fell to 4.6 months from 4.8 months in June. The median price of a new home fell 2.5 percent year-over-year and dropped 2.1 percent month-over-month to $224,000.
Consumer readings and Bernanke's Jackson hole address are likely to predominate proceedings on Main Street in the unfolding week after a week, when trader mood vacillated between hope and despair concerning stimulus announcements not only from the European Central Bank but also the Federal Reserve.
Traders are expected to closely track the Commerce Department's personal income and spending data for July, consumer confidence readings due to be released by the Conference Board and the Reuters and the University of Michigan combine, the National Association of Realtors' pending home sales index for July and speeches by central bank chiefs of the Federal Reserve and the European Union, due at the annual Jackson Hole symposium to be hosted by the Kansas Federal Reserve.
The weekly jobless claims report, the results of the ISM-Chicago's manufacturing survey for August, the Federal Reserve's Beige Book and other Fed speeches scheduled for the week may also create some ripples in the market. The S&P Case-Shiller house price index for June, the preliminary second quarter GDP estimate, the Commerce Department's factory orders report for July and the Treasury auctions of 2-year, 5-year and 7-year notes round up the economic events of the events.
Despite firmer equity prices, consumer confidence may not have improved much, given rising gas and food prices. The lingering eurozone debt crisis could also weigh on sentiment.
The Beige Book could reveal a modest uptick in its assessment of growth, given the improvement relayed by some of the recent data points. BMO Capital Markets is of the view that the Beige Book could upgrade slightly its earlier view of tepid job growth and acknowledge further healing in housing markets, although it could also shed light on the adverse impact of drought on crop production and food prices.
Personal income could improve in July, going by recent labor market statistics. Rising income levels should offer some consolation to consumers, who are left to battle with higher gas and food prices.
Cleveland Federal Reserve Bank President Sandra Pianalto is due to speak to the Newark Area Business Luncheon, in Newark, Ohio at 12:15 pm ET. Chicago Federal Reserve Bank President Charles Evans will speak to an MNI seminar in Hong Kong at 6:15 pm ET.
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., is scheduled to be released at 9 am. Economists expect a 0.3 percent year-over-year drop in the 20-city composite house price index for June.
The survey by S&P Case-Shiller showed that house prices rose a better than expected 0.91 percent month-over-month in May, while annually, prices were off 0.66 percent.
The Conference Board is scheduled to release its consumer confidence report for August at 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index edged down to 65.5 in August.
The consumer confidence index rose to 65.9 in July from 62.7 in June. The consensus estimate had called for a small drop. The present situation index edged down 0.4 points to 46.2, while the expectations index rose 5.7 points to 79.1.
The Bureau of Economic Analysis is due to release its preliminary estimate of second quarter GDP at 8:30 am ET. Economists expect GDP growth to be upwardly revised to 1.6 percent.
U.S. economic growth slowed in the second quarter of 2012, but still grew by more than most economists had predicted. The U.S. gross domestic product grew at 1.5 percent in the second quarter. That marks a slowdown from the 2 percent growth posted for the first quarter, but a smaller contraction than most economists, who predicted just 1.2 percent growth for Q2, had expected. The first quarter data, furthermore, was revised up from 1.9 percent growth previously reported.
Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to have remained unchanged in July.
The pending home sales index fell 1.4 percent month-over-month in June, while the previous month's increase was downwardly revised by 0.5 percentage points to 5.4 percent. Pending home sales declined in the North, the Midwest and the South, while sales rose in the West.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended August 24th at 10:30 AM ET.
Crude oil inventories fell by 5.4 million barrels to 360.7 million barrels in the week ended August 17th. Inventories remained above the upper limit of the average range for this time of the year.
Gasoline stockpiles fell by 1 million barrels compared to a 1 million barrel increase in distillate inventories. Gasoline inventories were in the lower half of the average range, while distillate inventories were below the lower limit of the average range. Refinery capacity utilization averaged 92.1 percent over the four weeks ended August 17th compared to 92.6 percent over the previous four-week period.
The Federal Reserve is due to release its Beige Book, a compilation of anecdotal evidence on economic conditions from each of the 12 Federal Reserve districts, at 2 PM ET. The report is normally released about two weeks before the monetary policy meeting is held.
The Labor Department is due to release its customary jobless claims report for the week ended August 25th at 8:30 AM ET. Economists expect claims to decline to 370,000 from 350,000 in the previous week.
U.S. jobless claims unexpectedly rose by 4,000 to 372,000 in the week ended August 18th. The four-week average also ticked up to 368,000, while continuing claims for the week ended August 11th also rose 4,000 to 3.317 million.
The Bureau of Economic Analysis is due to release its personal income & outlays report for July. Economists expect the report, which is due out at 8:30 am ET, to show that personal income rose 0.3 percent, while personal spending is expected to have increased by 0.5 percent.
Personal spending remained unchanged compared to the previous month in June. The previous month's reading was downwardly revised to show 0.1 percent drop. Real spending was down 0.1 percent in June. With personal income increasing 0.5 percent, the savings rate rose to 4.4 percent.
The Kansas City Federal Reserve is due to release the results of its manufacturing survey for August at 11 am ET.
Kansas City Federal Reserve Bank begins its Jackson Hole symposium, with Federal Reserve Chairman Ben Bernanke, European Central Bank President Mario Draghi and International Monetary Fund President Christine Lagarde expected to speak.
The results of the Institute of Supply Management-Chicago's business survey for August are scheduled to be released at 9:45 am ET. Economists expect the business barometer index based on the survey to edge up to 53.8.
The business barometer unexpectedly rose to 53.7 in July from 52.9 in June. While the new orders index rose 1 point to 52.9 and the order backlogs index climbed 10.6 points, the production index fell by 2.5 points. The employment index declined by 7.1 points to 53.3.
Reuters and the University of Michigan are due to release the final report on the consumer sentiment index for August is scheduled at 9:55 am ET. The consumer sentiment index is expected to be left unrevised at 73.6.
The Commerce Department is due to release its report on factory goods orders for July at 10 am ET. Economists estimate a 2 percent increase in orders for factory goods.
Factory good orders fell 0.5 percent month-over-month in June following a 0.5 percent increase in June. Shipments fell 1.1 percent, unfilled orders edged up 0.3 percent and inventories were up 0.1 percent.
Meanwhile, durable goods orders, making up the bulk of factory goods, rose 4.2 percent month-over-month in July, with the bulk of the upside coming about due to a 53.9 percent jump in orders for non-defense aircrafts and parts. Excluding transportation, orders fell 0.4 percent following a downwardly revised 2.2 percent drop. Non-defense capital goods orders, excluding aircrafts and parts, considered an indicator of capital spending fell 3.4 percent.
by RTT Staff Writer
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