The week ahead: All about the economics
There will be lots of talk about of Greece and Spain. Pay more attention to the economic reports coming in the United States, especially the big jobs report Friday.
Big question: Did the small gains the stock market saw this past week mark a bottom from the pullback that began in April?
Maybe. And you could become more optimistic by futures trading that suggests stocks will open solidly higher on Tuesday. But some healthy skepticism is in order because the schedule for the week ahead is filled with important economic reports that will tell us a lot about the U.S. and global economies.
The big report for the United States is the jobs report on Friday. Right after the jobs report is the Institute for Supply Management's May manufacturing report. Two important reports on Friday will offer a look at the health of China's economy. Plus, Germany, Britain and the eurozone will report on manufacturing in that region. Ireland votes Thursday on the euro-zone fiscal compact.
The chances there will be a lot of volatility during the week? High. Could be something really bad happen? Probably not yet, even if the Irish reject fiscal authority required by the European Union. The Spanish banking crisis could explode in importance. But the big event will be the Greek election on June 17 and whether that means Greece gives up the euro.
If the numbers come in badly, you can expect lots and lots of talk about QE3. Or a third round of quantitative easing. So, QE has meant the Federal Reserve has bought in Treasury securities in hopes of adding more cash to the economy.
The Fed has absorbed a lot of body punches over its first two rounds of QE. (Yes, it's about as an awful a piece of jargon as one can imagine.)
Critics say it's inflationary and point to rising food prices as proof. Food prices are a function of global forces. There is no labor inflation and certainly no real-estate price inflation, except in a very few markets.
Expect nothing from the Fed unless the economy seizes up.
A nice rally that could be short-lived
The U.S. stock market produced a big rally on Monday and spent the rest of the week trying to hold onto it.
The Dow Jones industrials ($INDU) finished with a 0.7% gain. The Standard & Poor's 500 Index ($INX) gained 1.7%, and the Nasdaq Composite Index ($COMPX) gained 2.1%. The small-cap Russell 2000 Index ($RUT) rose 2.6%. There was strength in housing after better-than-expected reports on existing- and new-home sales.
Apple (AAPL) rose 6% after Dell (DELL) said its notebook business was struggling against tablets like the iPad.
Airlines jumped as crude oil (-CL) fell below $91 a barrel in New York.
And then there was Facebook's (FB) initial public offering that has been a mess. The stock went public at $38, closed a week ago at $38.23 and fell 17.4% this week. Critics blamed everyone -- investment bankers, Facebook, the Nasdaq computer system.
While the rally was modest, it had had been building for some time as many stocks had become oversold since the sell-off began in early April. Investors have worried -- with reason -- that the pull-back is a repeat of 2011, which was a repeat of 2010.
It's not clear that the rally can be sustained. The charts suggest the downtrend from April is still intact. The S&P 500 bounced off 1,150 five times last year before a year-end rally began in early October.
|Markets for the week|
|5/25/2012||5/18/2012||% chg.||YTD chg.|
|U.S. Dollar Index||82.52||81.42||1.35%||2.49%|
A big week for economic data geeks
There are three big U.S. economic reports:
Jobs and unemployment for April. This is the big one and will be issued at 8:30 a.m. ET on Friday. The consensus estimates are for the national unemployment rate to hold at 8.1%. Payrolls may rise by 150,000. IHS Global Insight sees payrolls rising by 165,000, arguing that April's gain of 115,000 new jobs understated the recovery's strength.
Institute for Supply Management's May manufacturing index. This also is due Friday. And the consensus is for the index to slip to 54 from 54.8 in April. This is not a bad number. A reading above 50 means means the economy is still growing.
Gross Domestic Product, due Thursday morning. This is a revision of the first-quarter estimate. Domestic grown is supposed to slip to a 1.9% annual rate, compared with an original estimate to 1.9%. It's not a great number, but the British are going back into recession, and other economies are weakening.
Also due next week:
Standard & Poor's Case-Schiller Home-Price Index, due Tuesday. look for smaller price declines in 20 big markets.
The Conference Board's May Consumer Confidence report, due Tuesday. Lower gasoline prices should help.
Jobless claims, due Thursday. Look for a number around 370,000
Auto sales for May, due Friday. Edmunds.com is expecting sales overall of about 1.4 million units, with a seasonally adjusted annual rate of 14.4 million units. Toyota's (TM) numbers should be strong as it recovers from the March 2011 earthquake and tsunami in Japan.
The big international reports to watch are two reports on manufacturing trends in China and manufacturing indexes for Germany, Italy and the European Union. All come on Friday -- before the U.S. reports.
Earnings are modest
The first-quarter earnings season is largely done. Because of the short week, there are very few market moves.
The biggest may well be Bank of Nova Scotia (BNS) on Tuesday and Joy Global (JOY) on Thursday. Joy Global makes mining equipment, especially for the coal industry. It's affected by what happens in China and what happens to natural gas. The stock is off 40% in the last. year.
Earnings grew 8.1% in the second quarter, but Apple distorts matters, according to Thomson Reuters. Take it out, and the growth rate falls to 5.8%. Of 489 S&P 500 companies that have reported results, 67% have beat Street estimates. That's better than the long-term average of 62% but lower than the 68% beat rate of the prior four quarters.
The second-quarter season may not be so robust. Thomson Reuters sees 7.4% growth rate over 2011. But financial stocks will show the best results. Taking them out will cut the growth rate to 0.3%.
Socialism says it is for the people, but notice it is not for the Socialist him/herself
Wake-up Fourth year and Long over due.....Punt Obama out
Do you think unemployment or employment matters to them? It's election year. Unemployment has no where to go but down.Jobs? They don't need no stinking jobs (you might though). The debt? Who cares. Nobody has really told the public what the real figures are anyway. Does any of it matter? Who knows. You don't. Joe Smoe does not. That is for sure.
You don't actually think that you matter enough to be told the truth do you?
Only to be adjusted UP the following week.....
How pathetic is that! Imagine your investor telling you "I made you $10,000 this month" only to tell you a week later, "Oh that $10,000, I really only made you $100". You would be a little P.O.ed wouldn't you?
This is in essence what they are doing with the jobs numbers, claiming it is just below the magic number of 400,000 just to fool everyone that doesn't actually investigate.
Comrade ActiveRIA, please show some respect. I know that is hard for extreme leftists.
I have learned this website odes not like critic's of Obama. Most of my posts with "57 States" outside of quotes disappear. I don't comment on issues outside of economice like abortion, gay rights, drugs and such... I have seen my posts disappear at times. I deplore censorship.
Our idiot President recently discharged a soldier for saying he would not obey an illegal order issued by Obama on face book. Mind you he didn't disobey such an order yet. Mr. Obama is no friend of those in uniform.
My digs on Obama are that he is dumber than a rock, clueless about economics, more corrupt than Nixon, and lazy... We have about as much transparency as a Chicago smoke filled back room...
Mr. Obama is obstacle to spending cuts. His budget proposed another 600 Billion in new spending increasing it to the 4.4 Trillion level. It did not get a single vote in Congress, including EVERY democrat in the house and senate voting against it. The budget and debt problems cannot be fixed while he is in office.
ActiveRIA... you cannot have a discussion or reach a deal without free speech... I just wonder why sane economics must be so left/right.
I mean if the damn Buffett rule (47 billion/year accroding to the CBO) would get the Donkeys to eliminate their 800 Billion in new spendinging I'd go for that. But all of Obama's spending must go. And then we need to slash another 400 billion. Then we could use all the 47 billion a year to pay down the debt and perhaps more new taxes. But, ZERO NEW SPENDING until the debt is under 8 trillion.
I hope they never remove your posts again.
Comrade ActiveRIA... We also need to drastically slash the size of government. It was consuming 17% of GDP when Obama took office and today a whopping 26%+ and growing.
Government is not the solution, it is the problem. A 9% increase in GDP over less than 4 years cannot continue. We must END OBAMANOMICS!
Doda, my source is the IRS, whose director recently made that statement to Congress.
Since recent data from the CBO confirms, this, I can only assume your information is out of date, or you wish to push some politcal agenda, such as the Buffet rule which according to the CBO will generate 47 Billion a year. With this years deficit likely to be 1,235 (recent CBO estimate), if the Republicans passed this class warfare idea of Obama's, you would be willing to reduce spending 1,188 right now?
Didn't think so... Since 800 billion of this belongs to Mr. Obama, we would of course just be eliminating HIS NEW SPENDING for the most part....
You democrats refuse to eliminate this SPENDING... Instead insisting on taxes to pay for his crack pot SPENDING on things like guns for Mexican drug lords, Solyandra, GSA junkets, and special interest paybacks...
Talk to me when you are serious about cutting at least 1 trillion a year in spending...
ABS, try to remember this is an extreme far left website. CNBC is basically an arm of the democrat party, and MSN is their online propoganda arm. I would be surprised to see many non-socialist views expressed here or any for sane fiscal policy. Why too many people vote for a living today. This is what is wrong with the country.
Just hope everyone is having a Nice Memorial Day weekend....And enjoying the Race today.
My salute goes out to Active Military, Veterans and the Deceased Soldiers, ALONG WITH THEIR FAMILIES....
So don't forget to show respect for the losses we have endured since the Civil War...
And Celebrate Decoration/Memorial Day accordingly...
I have no more time to discuss he said/she said, this President,that President or candidate today..
Comrade ActiveRIA, the Road block for fiscal responsiblity is none other than "57 States" demand that we continue to SPEND, Borrow, Debase.
We have RECORD tax receipts. None higher in history! We have Obama and his 800 billion in new spending every year! This is as much as both of W's wars cost while he was running things.
Step one, all of Mr. Obama's new spending must be eliminated. Saving 800 Billion this year.
Step two, reduce the Defense budget 200 Billion this year.
Step three, come up with 200 billion in other CUTS this year.
This will eliminate the deficit, Then, AND ONLY THEN, raise taxes (I suggest we tax the 50% that pay nothing 5%-10%). All this new money should be used to reduce Obama's 5.5 Trillion in newly accumulated debt.
Zero NEW SPENDING until the debt is reduced below 8 Trillion.
Or are you like the typical far left wing radical that will say we MUST keep spending? If so, you and Obama think alike. Even his new budget which recieved ZERO votes in the House or Senate, demanded yet another 600 Billion in NEW Spending. Clearly not anywhere near a balanced approach...
And as for Simpson Bowles...Lets put all the cuts up front and the new taxes 7 years out, instead of the reverse that Mr. Obama killed, because their wasn't ENOUGH SPENDING to suit him.
Talk about fiscally irresponsible and clueless... Mr. Obama is truely is the Obstacle, and this November we will get rid of him...
Comrade ActiveRIA... you have an interesting view on the rich.... You seem to view letting them KEEP THEIR MONEY as welfare system... Typical leftist view...
Sorry, but just because the government chooses to let people keep what is theirs, does not constititue a "welfare system".
You also seem to feel that not all people are equal for taxation, and that some should be taxed more than others. Fairness means Equality, unless you are a democrat.
Taxes have been that same for the last ten years, so your class warfare crap about the rich recieving tax breaks is nonsense. The real propblem is the 48% that pay ZERO. Not the 1% that pay 40% of all taxes.
We need to slash spending TODAY and you believe we should not do that. We need to at least eliminate Obama's new 800 Billion in new spending. Which is now as much as the defense budget. And yes we need to slash defense spending. We are not being paid to be policeman to the world.
Let me ask you this with only one war still going on why has Obama INCREASED the defense budget instead of slashing it? He can start anytime he wants.
Once again we don't have a taxing problem we have a SPENDING problem and we will fix it in November by firing "57 States" and another 2000+ Dumb Donkeys....
Tumbleweed, the only way for banks to fail is if governments cannot pay their bills. No countries with printing presses can always debase, the socialists last way of paying for things is to devalue the savings of others. Those countries without printing press will default, be unable to borrow, and thus have to balance their budgets immediately.
The system is in trouble BECAUSE of GOVERNMENT DEFICITS on socialist programs.
Plain and simple...
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[BRIEFING.COM] S&P futures vs fair value: +7.20. Nasdaq futures vs fair value: +23.00. The S&P 500 futures trade seven points above fair value.
Asian markets ended the day on a mostly higher note. Japan's weak preliminary Industrial Production report (-3.3% month-over-month versus expected -1.0%) prompted the Ministry of Economy, Trade, and Industry to lower its industrial assessment.
- In other data:
- South Korea's Industrial Production rose 2.9% ... More
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