Steady gains in the S&P 500 yesterday managed to erase all the losses from earlier in the week. The index now stands 0.93% higher on the week, though futures are pointing to a lower open ahead of data at 8:30. Meantime, the U.S. dollar index is down, oil is once again higher than $71, and gold has hit a 2-week high.
Data this morning will have a big influence on whether markets end the week climbing or plummeting. The Personal Income & Outlays report is a key forward-looking survey on three fronts. It is expected to show higher income and consumption, so a disappointing report could extend on pre-session losses.
The later Consumer Sentiment release will be less influential, but markets are always interested in surprises.
8:30 ― The Personal Income & Outlay report gives data on consumption, income trends, and inflation. The spending component is expected to gain 0.3% in May ― its first gain in three months ― after dipping 0.1% in April; personal income is set to gain 0.4% following a half-percentage point gain in April (boosted by unemployment insurance); and the core PCE price index should rise a benign 0.1% in May, following a 0.3% gain a month earlier.
Senior economist Ellen Zentner from the Bank of Tokyo-Mitsubishi gives a more optimistic reading: “For personal income the big story in May will be the $250 social security checks that were sent out to 52 million recipients over the month. If you annualize that $13 billion in payments, you get a big $156 billion boost to personal income in May, worth about one percentage point of growth. Without the social security payments, personal income in May would have been flat.”
Analysts at BMO Capital Markets say to keep an eye on the savings rate, which has been on a rapid rise during the recession. It is currently at 5.7% and it could pas 6.0% today to mark a 16-year high.
10:00 ― Predictions are split on whether Consumer Sentiment will continue the recent rise that began in March, but all analysts agree on one thing: the move this month will be small. Following a 69.0 reading in May, the consensus looks for a 69.7 score in June, with forecasts ranging from 68.5 to 70.0.
Sentiment for recovery has been on the rise, but the rebound in gasoline prices can have an immediate impact on consumer surveys, and the unemployment rate continues to approach double-digits, hurting any chance that sentiment could surge.