By Theresa Sheehan
PRINCETON (MNI) – The week ahead leads up to the Christmas holiday
and the bond market will close early on Friday, December 23, and will be
closed on Monday, December 26.
The proximity to the holiday means that the second-tier data
releases will get scant attention, and markets will concentrate on the
few big reports for the week — namely housing starts, existing home
sales and new orders for durable goods. Some of the data will be
released slightly sooner than usual to allow for holiday schedules.
The December 26 week will be quite similar, with Friday, December
31, seeing any early close in the bond market, and a full close on
Monday, January 2, 2012. The stock market will be open for a full day on
Friday since it is the last business day of 2011. The economic data
calendar during this week is quite light, and probably little will
disturb the calm in the final week of the year.
The calendar of public appearances by Federal Reserve and
government officials will remain quite sparse until after the New Year’s
observance. It looks like the U.S. Congress will remain in session
perhaps a little while longer as it resolves disputes over extending
payroll tax rates and unemployment benefits.
Economic Data
The NAR’s data on sales of existing homes for November at 10:00 ET
on Wednesday will be accompanied by a substantial revision to data for
the last five years — which is expected to present a decidedly more
downbeat picture of housing over the course of the financial crisis and
recession. Markets are prepared for this, but even so it will be
discomfiting to adjust to lower numbers while the economic outlook faces
increased uncertainty.
Sales of new single-family homes for November will be released at
10:00 ET on Thursday. While sales for new construction has been stuck in
a narrow range near the 300,000 level since May 2010, declines in
mortgage rates appears to have provided a little upward momentum in this
sector.
This was also hinted by an increase in the NAHB/Wells Fargo Housing
Market Index last month. The December data will be released at 10:00 ET
on Monday and it is possible that the reading will sustain the 3-point
increase to 20 that was registered in November. If so, it suggests that
homebuilders are not only seeing some increased traffic for prospective
buyers, but that consumers are finally starting to find prices of new
home more attractive even with plenty of bargain-priced existing homes
on the market.
Data on starts of new homes in November will be released at 8:30 ET
on Tuesday. Home starts have fluctuated on a month-to-month basis,
mainly due to the multi-unit sector. Starts for single-family homes have
consistent hovered near the 400,000 level since July 2010.
The data on new orders for durable goods in November is set for
release at 8:30 ET on Friday. The transportation component is widely
anticipated to provide a big boost to the overall number. New orders for
Boeing aircraft were exceptionally strong at the Dubai Airshow in that
month, and demand for new motor vehicles indicates that orders to
replenish inventories could be solid.
The report on the third estimate of third quarter GDP for 2011 is
at 8:30 ET on Thursday. Markets will quickly digest the last look at
July-September period. At this point the fourth quarter is already
well-advanced. With the hope of a more robust finish to the year, the
older data simply is not as interesting.
Personal income and spending numbers for November will be released
at 8:30 ET on Friday. Gains to wages and salaries will be modest, at
best, while expenditures are likely to reflect a burst of holiday
spending. Durable goods spending is likely to be substantial along with
the improved pace of sales of motor vehicles.
The final Reuters/University of Michigan Consumer Sentiment Index
for December will be published at 9:55 ET on Thursday, a day earlier
than usual. The preliminary report set the index at 67.7, a 3.6 point
rise from November. The index will probably not be much revised. If so,
it hints that consumers are starting to regain confidence near year-end,
and are responding to lower gasoline prices and a brighter outlook for
the labor market.
Initial jobless claims for the week ended December 17 at 8:30 ET on
Thursday are anticipated to continue the recent string of favorable
readings that are consistent with fewer layoffs. This will be the survey
comparison week from November, and if the level shows further declines,
could raise hopes that the 8.6% unemployment rate in the November
employment report was not a fluke, and will be sustained in the December
report.
The Conference Board’s Leading Economic Index for November should
benefit from the lower levels of claims that have been reported in the
last few weeks. Other positive contributions are expected from interest
rates, consumer confidence, and plant and equipment expenditures.
The BLS will release data on state and regional unemployment for
November on Tuesday at 10:00 ET, and on mass layoffs in November at
10:00 ET on Thursday. The former will add some nuance to the national
report, while the latter is likely to confirm the private data for
restrained layoff activity.
Central Bank Activity
No other major central bank announcements are scheduled for the
remainder of December except the Bank of Japan meeting on Tuesday and
Wednesday, December 20-21. The Bank will probably make no adjustments to
its current policy. By this time of year, central bank activity normally
quiets down until after the New Year. However, with the euro zone crisis
continuing, it opens the possibility of more surprise announcements like
that related to central bank swap lines that took place on November 30.
U.S. Treasury Auctions
The U.S. Treasury will auction new 2-, 5-, and 7-year notes on
Monday through Wednesday, December 19-21, respectively. All will settle
on Tuesday, January 3, 2012. There will be no further coupon offerings
or auctions until the next leg of the quarterly refunding is announced
on Thursday, January 5.
** Stone & McCarthy Research Associates **
[TOPICS: M$$FI$,M$U$$$,MAUDS$]
