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After last week’s roller coaster of market gains and declines, this week could see more of the same. However, it won’t be the economy causing the volatility this week; the week is relatively light on data coming from various agencies, with the majority housing related. This week sees the release of building permits, housing starts and measures of home prices.
And while the housing-related data is important, driving the week and the market’s returns will be the slew of earnings reports slated for this week. As we are now in the third week of so-called earnings season, the number of reports and different sectors are critical gauges of the overall health of the U.S. economy. Guidance numbers will continue to be the key. Even though the Fed doesn’t necessarily take into account these numbers, they could be a window into the minds of the Fed’s governors with regards to raising interest rates.
Also playing into the week’s volatility is ever-present China and its market issues. Last week, Beijing announced a few new stimulus measures to prop up the stalling economy. This week could see more of the same.
Monday kicks off the week especially light: the National Association of Home Builders (NAHB) Housing Market Index is the only reported data. The survey looks at 900 different builders and showcases how they feel about home sales and renovations. The measure has been trending up over the course of the year. Normally, it has a muted impact, but as the only game in town, it could help the markets rally.
Also scheduled is a speech by Federal Reserve Bank of Richmond President Jeffrey Lacker at the University of Richmond.
Tuesday continues the housing data binge for the week, with several pieces of data to be reported. First up is the Census Bureau’s Residential Building Permits Index. The gauge of future construction activity has recently regained its footing and started to rise after dipping in the last two months. Analysts expect a slight rise again this month. The Bureau will also report housing starts. The annualized number of new residential buildings that actually began physical construction has less of an effect than building permits, but it’s still a good indicator of future economic activity. The metric has dipped in the last two months, but analysts are forecasting a slight increase this month.
The only economic data reported on Wednesday will be crude oil inventories, which is a good thing as there is a TON of earnings reports being released Wednesday. As for inventories, they are set to drop once again on cutbacks in the oil patch.
Thursday will come in hot-n-heavy on the housing front. The day will see the release of the Fannie Mae and Freddie Mac Housing Price Index which looks at the change in home prices. After showing slight declines, the number has started to trend up. That’s key for homeowners still underwater on their mortgages. The National Association of Realtors will also release its existing home sales figures. That number took an unexpected dip last month. However, with the Fed keeping interest rates down, analysts predict there should be a slight uptick in the data.
Unemployment numbers and more earnings reports than you can shake a stick at will also be released Thursday.
After the torrid pace of earnings reports in the last few days, Friday goes out like a lamb. Additionally, investors will get a much needed break from economic data. The only report to close out the week is Markit’s Purchasing Managers’ Index (PMI). The measure tends to have a muted effect as other PMI reports have already been issued for the month.
All in all, the upcoming week is dominated by earnings reports and more specifically, the forward guidance contained in those reports. With the number of sector and industry bellwethers starting to work through earnings season, the markets could react and be quite volatile based on the nature of the guidance. Investors should plan accordingly.
As for the housing data, it shouldn’t be a major factor for the stock market when faced with the earnings. However, the data could play into the Fed’s rate decisions, so it’s still worth paying attention to.