Equity markets are mostly lower across the globe Monday, leading US stocks to open sharply lower ahead of a moderately busy schedule.
Two hours before the bell sounds, Dow futures are off 30 points to 10,543 and S&P 500 futures are down 4.50 points to 1,142.00.
Commodity prices are mixed as WTI crude oil is trading down 58 cents to $80.66 per barrel but Spot Gold prices are up $2.37 to $1,104.27.
Key Events This Week:
Monday:
8:30 ― The Empire State Manufacturing Index is expected to expand for the eighth consecutive month in March. The consensus expects the index to fall 3 points to 22.0 in March, reflecting strong growth overall in the region.
Economists from Nomura worry that the strong figures in February may not have been wholly accurate due to the early timing of the release.
“Most respondents of this survey usually complete a questionnaire by the 10th of the month, so there is a possibility that last month's survey did not fully reflect the impact of the storms,” they said. “In addition, gradual declines in the index should be expected as the recovery matures.”
9:00 ― The last TIC Flows report showed foreign appetite for U.S. securities increased at a much stronger pace than anticipated, particularly for Treasuries. Private purchases, by contrast, fell compared to the previous month. Markets will be eyeing both of those trends for the January data.
“The market is likely to focus on China's net purchases, which declined in December,” said economists from Nomura, adding that they see “little chance of major reserve diversification from China.”
9:15 ― Industrial Production, the key report of the day, is set to be flat in February following a 0.9% jump in January and a 0.7% climb in December. The general trend in production continues to be strong but poor weather pushed the figures down, particularly in the Northeast. The shutdown of two Toyota plants also played a role.
“While the impact of fiscal stimulus and inventory restocking has led to questions about the sustainability of growth in industrial production, production levels have been expanding across a progressively wider spectrum of industries, indicating that growth will continue,” said economists at BBVA.
The team at IHS Global Insight is a bit more optimistic.
“The utility sector should benefit from a colder than normal winter month, but heavy snow in the mid-Atlantic states disrupted manufacturing and triggered a steep drop in hours worked during the employment survey week,” they said. “That disruption didn't pull down the whole month, though, and apart from motor vehicles we still expect manufacturing output rose. But there was a cut in motor vehicle output after a very strong January performance, due in part to Toyota's temporary shutdowns.”
1:00 ― The NAHB Housing Market Index, a measure of homebuilder sentiment, remains far from optimistic at 17, though at least it is double the all-time low of 8 seen about a year ago. The index inched up 2 points in February and the general trend is expected to be upwards, but it’s not clear builders have reason to be more optimistic this month.
“Although we expect the housing market to recover gradually this year, recent statistics suggest little reason for an improvement in builder optimism,” economists from Nomura said. “For instance, new home sales recently reached a new historic low. Until market indicators show some signs of growth we expect the homebuilder index to hover at low levels.”
Treasury Auctions:
- 11:30 ― 3-Month Bills
- 11:30 ― 6-Month Bills
Tuesday:
8:30 ― Snow storms and poor weather are expected to push Housing Starts down in February, following a 2.8% gain in January. Demand remains weak overall, though new construction on residential homes is up 21% from last year. Expectations among economists are diverse, ranging from 530k to 591k, and the consensus is 565k.
“Severe winter weather is likely to deliver another blow to the already-wobbly construction sector,” wrote economists from Nomura. “We forecast housing starts fell by about 5% to an annualized rate of just 560,000 in February, the lowest since October 2009.”
Building permits ― contracts that have been signed but not finalized ― are also expected to fall by around 3%, pushing the annualized pace to 605,000 units.
2:15 ― The FOMC is expected to maintain the target interest rate in the band of zero to 0.25% for many more months, so attention will be on the statement itself rather than the meeting’s decision.
“The factors justifying the extremely low level of rates ― ‘low rates of resource utilization, subdued inflation trends, and stable inflation expectations’ ― have not meaningfully changed,” said economists at Nomura. “We therefore expect the post-meeting statement to retain the ‘exceptionally low... for an extended period’ pledge.”
More generally, economists from IHS Global Insight said the statement should mention “further strengthening in the economic recovery, but continuing constraints on household spending due to tight credit, modest income growth and lower housing wealth.”
Treasury Auctions:
- 11:30 ― 4-Week Bills
Wednesday:
8:30 ― Economists anticipate the Producer Price Index to deflate by 0.2% in February, after a whopping 1.4% increase in the prior month. The downward shift is caused by falling energy prices as fuel oil prices fell about 7% in the month. The core index, which excludes energy and food prices, is set to inch up 0.1%.
“Production is picking up as the recent inventory cycle expires, and materials prices are rising, but pricing power for finished goods is limited,” said economists at IHS Global Insight.
Thursday:
7:30 ― Elizabeth Duke, a governor of the Federal Reserve, and Sheila Bair, chairman of the FDIC, speak to the American Bankers Association government relations summit in Washington.
8:30 ― Unlike the PPI from Wednesday, the Consumer Price Index should be less impacted by falling energy prices. Economists expect to see 0.1% price gains on the headline and the core index, following a 0.2% gain in the headline and a drop of 0.1% in the core.
“Declining rent prices could continue to weigh down on the shelter component, which constitutes approximately 30% of the index,” wrote economists at BBVA. “Furthermore, substantial economic slack, as exhibited by the high unemployment rate and low rate of capacity utilization, will offset prices pressures and inflation expectations remain well anchored. As a result, we continue to expect core inflation to remain low but positive in 2010.”
8:30 ― Initial Jobless Claims fell to 462k in the first week of March, raising hopes that another decline this week ― the survey period for the payrolls data ― could signal job growth for the month. But in order to point to sustained growth most economists say the weekly survey needs to show a consistent number closer to the 400k mark.
Economist Ellen Zentner from BTMU called this week’s data “especially important because it will bolster, or dash hopes of March showing the first gain for private sector jobs since adding +75K in November 2009 ― barring November’s job gain it’s been more than two years since the private sector has added jobs.”
Economists from Nomura added that new claims remain too high to indicate growth.
“We expect a further decline in claims over the next two weeks,” they wrote. “If this does not materialize, we expect that forecasts for exceptionally strong payroll growth in March will be reduced.”
8:30 ―Thomas Hoenig, president of the Kansas City Fed, along with Richmond Fed president Jeffrey Lacker and Cleveland Fed president Sandra Pianalto, speak about the role of banking in local economic growth at the American Bankers Association conference.
10:00 ― Leading Economic Indicators, a composite index tracking turning points in the economy, is expected to climb for the tenth straight month in February. In January the index eased from 1.2% to +0.3%, and in February the slowdown should continue to +0.2%.
“Although a wide interest rate spread and steady growth in inflation-adjusted money supply are likely to make positive contributions to the headline number, the softness of labor-related components will probably drive down the LEI to some extent,” wrote economists from Nomura.
10:00 ― A strong new orders component in February’s Philadelphia Fed Manufacturing Survey points to strong growth in March. The headline index improved from 15.2 to 17.6 last month, and this month economists look for a score of 18.0. Combined with the Empire Fed index these two surveys should point to robust manufacturing growth across the nation.
Economists from Nomura said to expect the headline number to be pulled back slightly to 17.0, but even so they were optimistic about the general direction.
“While inclement weather constrained the expansion to some extent ― as described, for instance, in the latest Beige Book ― most manufacturers in this region remain optimistic about business conditions.”
11:30 ― Elizabeth Duke, a governor of the Federal Reserve, speaks to the Women's Leadership Forum at the ABA conference in Washington.
Friday:
No Data Released.
