New economic data is scant this morning but the focus all week will be housing,  kicked off by the release of the homebuilder sentiment survey.

U.S. stocks have picked up 5.7% in the past three weeks, “as double-dip chatter has been muted by firmer data, and that trend could be extended this week with expected firmer housing market data,” said economists at BMO Capital Markets. 

Key Events This Week:

Monday:

10:00 ― The week begins on a pretty slow note with just one new bit of data, the Housing Market Index. The index gauges sentiment of home builders and continues to indicate widespread pessimism. A score below 50 indicates a negative outlook, and current level is just 13. Some economists look for an uptick to 14 this month, but don’t expect markets to jump with joy.

“The home builder sentiment index has been in a mild downward trend since May and is close to its historical low,” said economists at Nomura. “However, we expect the index to inch up to 14 in September from 13 previously, as the payback effect of the expiry of the home buyer tax credit is likely to be diminishing”

Tuesday:

8:30 ― Housing Starts, or construction of new homes, are expected to inch up in August after a slight 1.7% gain in July and a much larger 8.7% decline in June. Economists anticipate the index to report a seasonally-adjusted annual pace of 550k starts, slightly up from the 546k reported a month before. Single-family housing starts,  the key component in the index, are expected to fall as building permits ― or plans for construction ― have declined for the past four months. 

“These declines point to a drop in housing starts over the next two months,” said economists at IHS Global Insight. “For August, we project that starts fell 0.9% to 541,000 units (annual rate).”

2:15 ― Economic commentary from Ben Bernanke & Co. will be closely watched in the FOMC Meeting Announcement. It’s a virtual certainty that the Fed’s overnight lending rate will remain in the zero to 0.25% range, but a number of other issues are uncertain. A key topic is whether the Fed introduces new quantitative measures given the apparent slowdown in the economic recovery.

“In addition, there are greater than even odds that the Fed will reduce the interest rate paid on bank reserves as a measure to discourage excessive hoarding of cash balances held by banks at the Fed,” said economists at IHS Global Insight. “The FOMC will certainly discuss the pros and cons of additional quantitative easing measures, but will not likely ramp them up at this time.” 

Wednesday:

7:00 ― Refinancings have been surging due to low mortgage rates in the weekly MBA Mortgage Applications index. But purchases, which of course have a much larger impact on the economy, remain low.

As a result, home sales “remain at distressingly low levels,” said economists at Nomura.  “Meanwhile, the index of refinancing applications seemed to be losing some momentum recently as the index registered its first back-to-back declines since April.”

Thursday:

8:30 ― Weekly Jobless Claims, a closely-watched measure of how many Americans are filing for first-time unemployment benefits, have averaged 452k in the first two weeks of September, versus 487k in August (incl. 504k in the period ending Aug. 14) and 459k in July. Economists look for more of the same in this week, with the consensus of estimates at 450k. Such a figure arguably points to some job private job creation in the economy, but certainly not a robust level.

“Initial claims marked a small decline to 450k in the week of 10 September from 453k previously and 478k two weeks before,” said economists at Nomura, noting this suggests “the pace of lay-offs may be slowing.”

10:00 ― The good news is that nobody is expecting Existing Home Sales to continue tumbling in August. The bad news is that even a decent sized uptick will do little justice to the market after the 27.2% plummet in July. The current annual pace of sales is just 3.83 million, a 15-year low. Economists are anticipating that rate to move up to 4.050 million in August, with estimates ranging between 3.87 million 4.6 million.

At the top of the range are economists from Nomura, who believe the post-tax credit payback is over. But, they concede that pending home sales “showed only moderate growth in July, suggesting a downside risk to our forecast.”

Economists at BTMU said single-family home sales have reset at levels far below expected because the tax credit pushed sales forward more than thought. On top of that, “the economic environment remains sour for home-buying no matter how low interest rates have fallen,” they added. “In fact, low interest rates have instead spurred a refinancing frenzy, and while that still helps households lower debt levels, it does nothing to boost sales.”

10:00 ― The Leading Economic Indicators index, a composite measure that seeks to gauge broad turning points in the economy, is anticipated to move upward by just 0.1% for the second month in a row. The index has been wavering in recent months, falling twice in the past four months after saw 12 consecutive increases before that.

Economists at Nomura look for a slightly better 0.2% gain. “Although longer-term treasury yields dropped a bit during the month, the largest contribution should come from the spread between long- and short-term interest rates,” they said.

10:40 ― Charles Evans, president of the Chicago Federal Reserve, opens the two-day International Banking Conference in Chicago.

11:00 ― Treasury announces the terms of debt auctions to be held in the following week. Maturities include 2-year, 5-year, and 7-year Treausury coupons.

1:00 ― Paul Volcker, chairman of the President Obama’s Economic Recovery Advisory Board, speaks at the two-day International Banking Conference sponsored by the Chicago Federal Reserve Bank and the IMF.

The Federal Reserves hosts public hearings on the Home Mortgage Disclosure Act. This is an all-day event. HERE is the agenda

Friday:

8:30 ― Financial markets might not end the week on a positive note if Durable Goods drop by 1.0%, as anticipated by economists. The expected drop in August follows a 0.4% gain in July and a 0.2% decline in June. The culprit for the month’s decline is commercial aircraft orders, though economists at IHS Global Insight say computer and machinery orders could seem some bounce-back to offset that decline. 

“The machinery sector probably won't reverse July's entire decline, but it should give a noticeable boost to core capital goods orders,” they wrote.

Meanwhile, analysts at Nomura go way against the consensus and predict a 1.5% jump in the month with broad-based increases. 

“Although Boeing reported much lower orders in August, the Commerce Department's tabulation for the aircraft industry does not appear to have fully captured that strength,” they wrote. “We expect the August data to reflect some of July's surge in bookings.”

10:00 ― Like virtually every other housing index, New Home Sales sunk to new depths in July but are expected to see some bounce-back in August. The index fell a sharp 12.4% in July to an annual of 276,000 units, a fresh record low. Economists believe sales should jump to 290k in August, though predictions range between 275k 320k. 

“The most severe post-tax credit payback period for new home sales, which set a record low in July, is probably behind us,” said economists at IHS Global Insight. “With the economy and job growth slowly improving, we project a small improvement of around 5% in new home sales to 290,000.”

1:00 ― Jeffrey Lacker, speaks on economics and policy to the Kentucky Economic Association in Frankfort, Kentucky. 

2:00 ― Charles Plosser, president of the Philadelphia Federal Reserve, speaks on monetary policy at a Swiss National Bank conference in Zurich.