The Week Ahead: Fedsters, GDP, durables, trade

Federal Reserve Board (1917)

The Federal Open Market Committee, the money policy arm of the Federal Reserve, completes a two-day meeting on Wednesday, releasing a policy statement and member forecasts at 2 p.m. New York time. Fed Chairman Jerome Powell holds a news conference at 2:30 p.m.

The FOMC is seeking a course between Scylla and Charybdis, between increasing interest rates at a higher pace in the face of tight job markets and the consequent expectation of rising wages and prices, and keeping the pace slow or even lowering it, and a yield curve that is increasingly being seen  as a harbinger of economic downturn. Reuters on Friday published a report outlining the dilemma regulators face.

Since December 2015 the FOMC has raised its target for the federal funds rate seven times, 25 basis points at a time, to the present range of 1.75% to 2%. This year’s two increases have come down to one per quarter.

An increase of more than 25 basis points would be a market-rocking signal, as would any indication that regulators intend more than one increasing after September. That’s assuming, of course, that the conventional wisdom is correct and Wednesday’s announcement raises rates.

As the last month of the quarter nears its end, the third iteration of the gross domestic product hits the markets, on Thursday at 8:30 a.m. New York time. It will impact the markets if there’s a significant change from the second revision published last month. It’s not likely, so the report will probably be more of a confirmation than new news.

The news will come from a a series of more tightly focused reports: Durable goods orders and international trade in goods, each on Thursday, and personal income and outlays, on Friday, all at 8:30 a.m.

We’ll also get a look at housing in my favorite report for the sector, the Case-Shiller home price index on Tuesday at 9 a.m. It provides prices for 20 metro areas, as a well as a national summary, providing a useful degree of detail in assessing real estate markets. Two other housing sector reports will be published: New home sales on Wednesday and the pending home sales index on Thursday, each at 10 a.m.

Fed Chair Powell will deliver brief remarks on the U.S. economy at Rhode Island Business Leaders Day sponsored by Sen. Jack Reed, D-R.I., on Thursday at 4:30 p.m. in Washington.

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 claims for unemployment, from the jobless claims report at 8:30 a.m. Thursday.

The index of consumer expectations from the University of Michigan consumer sentiment survey at 10 a.m. Friday.

Events arranged by day:

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

Wednesday: New home sales at 10 a.m., petroleum inventories at 10:30 a.m., the FOMC money policy statement and forecasts at 2 p.m. and Fed Chair Powell’s news conference at 2:30 p.m.

Thursday: Jobless claimsdurable goods orders and international trade in goods, each at 8:30 a.m., the pending home sales index at 10 a.m., and the M2 money supply and the Federal Reserve balance sheet, each at at 4:30 p.m., and brief remarks by Fed Chair Powell at a Washington event, also at 4:30 p.m.

Friday: Personal income and outlays at 8:30 a.m., the Chicago Purchasing Managers index at 9:45 a.m. and the University of Michigan consumer expectations survey at 10 a.m.

I also keep an eye on the Baltic Dry Index, updated daily, and the 10-year implied inflation rate which is the difference between the yields on 10-year U.S. Treasury notes and  10-year Treasury inflation protected securities (TIPS).

By Tim Bovee, Portland, Oregon, Sept. 22, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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