This week will be a busy one with many market moving macro data scheduled to be released. We quickly updated our models. Our estimates are provided below. We note that we do have a few thoughts on three particular stocks, two of which we believe may be value plays. We are looking into them and will likely post our initial thoughts sometime this week.
Q4 '12 GDP
We believe initial Q4 GDP may surprise a bit to the upside. We have projected an annualized growth rate of 1.2%, slightly above the Street's 1.0% estimate. Given what we believe to be a higher than expected increase in wages and disposable income in the latter part of Q4, in addition to improvements in manufacturing and state of employment, we think GDP may come in higher than the 1.0% consensus. The Street's somewhat conservative estimate may be due to the surprising upwardly revised Q3 GDP of 3.1%. Many don't think the Q/Q growth rate will be high enough to give an annualized rate higher than 1.0%. Q4 GDP will be released on 1/30 (Thursday).
ISM Manufacturing (January)
January's ISM manufacturing index will be released on Friday, 2/1. Overall, economists do not expect any change from the prior month. The average of their estimates stands at 50.7. We believe ISM is more likely to come in below 50.0, or around 49.0, indicating contraction in manufacturing for the month of January. Contraction was evident in nearly all regional manufacturing survey results conducted by some of the regional Reserve Banks. The only one that showed significant enough improvement was the survey of the Federal Reserve Bank of Dallas. However, our model spit out an estimate of approx. 49.0 even after taking into account those improvements.
State of Employment (January)
The official monthly employment report is also scheduled to be released on Friday. The Street is expecting an increase of 185K in the NFP figure, with which we agree. Improvements in weekly initial jobless claims (although partially due to the application of favorable weekly seasonal factors, especially for the second and third week of Jan.) and the avoidance of the fiscal cliff, for the time being, we believe may have helped increase confidence of businesses and government agencies, possibly resulting in additional hiring. We note that the ADP employment indicator is one of the factors in our model. We used the Street's ADP estimate of a 172K increase for January.
Q4 '12 GDP
We believe initial Q4 GDP may surprise a bit to the upside. We have projected an annualized growth rate of 1.2%, slightly above the Street's 1.0% estimate. Given what we believe to be a higher than expected increase in wages and disposable income in the latter part of Q4, in addition to improvements in manufacturing and state of employment, we think GDP may come in higher than the 1.0% consensus. The Street's somewhat conservative estimate may be due to the surprising upwardly revised Q3 GDP of 3.1%. Many don't think the Q/Q growth rate will be high enough to give an annualized rate higher than 1.0%. Q4 GDP will be released on 1/30 (Thursday).
ISM Manufacturing (January)
January's ISM manufacturing index will be released on Friday, 2/1. Overall, economists do not expect any change from the prior month. The average of their estimates stands at 50.7. We believe ISM is more likely to come in below 50.0, or around 49.0, indicating contraction in manufacturing for the month of January. Contraction was evident in nearly all regional manufacturing survey results conducted by some of the regional Reserve Banks. The only one that showed significant enough improvement was the survey of the Federal Reserve Bank of Dallas. However, our model spit out an estimate of approx. 49.0 even after taking into account those improvements.
State of Employment (January)
The official monthly employment report is also scheduled to be released on Friday. The Street is expecting an increase of 185K in the NFP figure, with which we agree. Improvements in weekly initial jobless claims (although partially due to the application of favorable weekly seasonal factors, especially for the second and third week of Jan.) and the avoidance of the fiscal cliff, for the time being, we believe may have helped increase confidence of businesses and government agencies, possibly resulting in additional hiring. We note that the ADP employment indicator is one of the factors in our model. We used the Street's ADP estimate of a 172K increase for January.
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