Monday, August 29, 2011

Upcoming Data This Week

Let's start with employment. DOL's figures will be released on Friday and we can already discount the estimates which currently stand at 75K and 111K for non-farm and private non-farm payrolls. Weight given to the always questionable unemployment rate should be basically zero, so let's not think too much about the expected 10bps decline for the August figure. The market already expects lower numbers given the initial claims for the month (partially driven by the Verizon strike), the fiasco on Capitol Hill and the White House, the S&P downgrade and continuing rise in core PPI and CPI. For this reason, unless the payroll figures are below -15k, we don't think the market will react too badly towards the numbers. We note that Bernanke basically hinted that if the state of the economy gets worse, the Fed will come to the rescue.

We will likely see some volatility leading up to Friday's important employment numbers as the ADP and Challenger figures will be released on Wednesday before the open. Although those are highly correlated historically with DOL's employment data, there have been months where the two sets of data have gone basically in opposite directions. If the ADP figures come in much worse than expected (Aug. consensus is 100K), then depending on how significantly the market reacts, there could be a trading opportunity going into Friday's numbers.

Other data scheduled to be released this week include weekly initial jobless claims, Conference Board's consumer confidence (Aug.), ISM (Aug.), and the Chicago PMI (Aug.). ISM and the Chicago PMI will also likely provide more color on Friday’s employment numbers.

June pending home sales and home prices (Case/Shiller index) will also be released this week. Although we are way past June, those figures will impact a few related sectors, especially given the fact that President Obama has begun discussing other ways to help the housing market. The worse those figures are, the more they may increase the chances of Obama's begging to be successful, which could be positive for stocks in those sectors, at least in the short-term.

We note that other economic data for June and July will also be released this week. No matter if they are better or worse than expectations, we believe the market will forget about them after an initial and very short-term reaction.

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