By Theresa Sheehan

PRINCETON (SMRA) – The data calendar in the week ahead is not
particularly busy, and includes few major reports. The two that are most
likely to capture market attention are retail sales for December and the
Fed’s Beige Book. There are also numerous Fed officials scheduled to
give public remarks, and it will be the first chance to hear many of
them since the release of the FOMC meeting minutes from December 13, and
the expectation of an evolution in how the Fed transmits its intentions
for monetary policy.

Economic Data

The data on retail and food sales in December at 8:30 ET on
Thursday will round out the available numbers for consumer spending in
the fourth quarter, and help firm up expectations for growth as 2011
comes to an end. December sales of motor vehicles were somewhat above
expectations, and the same-store sales comparisons point to a fairly
good month for department stores and apparel retailers.

Overall, the holiday shopping season appears to have turned in a
solid performance in terms of volume, but deep discounting may have
restrained the dollar levels. Declining prices for gasoline will have
lowered sales totals at service stations.

The international trade deficit for November at 8:30 ET on Friday
probably will remain in line with recent months, with the deficit
reflecting higher imports of holiday goods and cheaper petroleum, and
some easing in exports in response to slower growth in some regions.
Increases in the dollar in December will not yet effect in this data.

However, the import price index for December at 8:30 ET on Friday
is likely to reflect stronger prices for some finished goods and foods.
Petroleum prices are measured in dollars, and oil prices were slightly
higher in the month, and so should be visible in the index. Export
prices could be somewhat lower on the agricultural component as food
commodity prices were broadly down in December.

The preliminary Reuters/University of Michigan Consumer Sentiment
Index for January is set for 9:55 ET on Friday. Weekly data hint that
consumers are feeling mildly more confidence at the start of the year in
spite of a bump up in gasoline prices. The labor market appears to be
the reason for improved attitudes.

The NFIB Small Business Index for December is expected at 7:30 ET
on Tuesday. The index has been nudging higher for the last four months,
and the December data is expected to maintain that trend. On an
historical basis, the readings remain fairly soft, but they continue to
work higher from the lows of the recession.

Initial jobless claims for the week ended January 7 at 8:30 ET on
Thursday could well continue with the current trend, maintaining a level
below the 400,000 mark, and inching lower, if a bit unevenly. Levels for
claims have not been this low since the first half of 2008, when the
recession began to bite. This is a hopeful direction for conditions in
the labor market.

Consumer credit in November at 15:00 ET on Monday should tell much
the same story as in recent months. Consumers are taking on more
non-revolving debt, especially for big-ticket items like motor vehicles.
Use of credit cards and other revolving credit may have increased a bit
as the holiday shopping period approached.

The data on business inventories for November at 10:00 ET on
Thursday will include the numbers for inventories at factories that was
already reported up 0.5%, and those for wholesalers which will be
released at 10:00 ET on Tuesday. Inventory building will make a positive
contribution for growth in the fourth quarter.

The Fed’s Beige Book will provide anecdotal evidence of economic
conditions across the 12 Fed Districts for approximately the six weeks
from late November through the first days of 2012. The report will be
released at 14:00 ET on Wednesday. We anticipate that the report will
characterize conditions as growing modestly in most — if not all —
Districts. We expect that the St. Louis Fed will compile the next
report, with the next most likely candidates of San Francisco or Dallas.

Central Bank Activity

The next few weeks will see considerable activity as most major
central banks make their respective scheduled monetary policy
announcements. Statements from the Bank of England and ECB on Thursday
will lead off the schedule. The situation in euro zone debt markets
appears to have stabilized, and it is quite possible that policy will
remain on hold — for now.

Next week will have a busy schedule of public appearances by Fed
policymakers. The press blackout period that begins about a week in
advance of the January 24-25 FOMC meeting approaches. There are some big
changes on the horizon for how the Fed communicates policy, and the
individual Committee members will take this opportunity to voice their
support (or lack thereof) for the evolution in monetary policy. Most
will probably agree with steps that increase transparency and reduce
uncertainty, but some may not like the form this will take.

We note that among next week’s appearance is the new Kansas City
Fed President Esther George who will speak on Tuesday.

U.S. Treasury Auctions

The final leg of the refunding for the fourth quarter 2011 will be
auctioned on Tuesday through Thursday with a new 3-year note, and
reopening of the 10-year notes and 30-year bonds, respectively. All will
settle on Tuesday, January 17 due to the Federal holiday on Monday,
January 16. The next refunding package will be announced on Wednesday,
February 1. A new 10-year TIPS note will be offered on Thursday.

Fourth Quarter 2011 Earnings Season

The release of earnings reports for the fourth quarter 2011 will
unofficially get underway on Monday with the numbers from Alcoa. There
will be few major reports for the rest of the week except for that from
JP Morgan Chase on Friday morning. It will be in the following week that
the pace will pick up considerably, including with numbers from Goldman
Sachs on Wednesday, January 18.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]