Expectations for this week’s data is solidly optimistic as economists have recently been revising their forecasts for 2010 growth upwards.

As Ellen Zentner from BTMU noted, “The most reliable broad indicators of the U.S. economy are expanding at a healthy clip, suggesting that first quarter growth will come in around 3.5% with all of 2010 coming in around 3.2%.”

Although Monday begins the week on a slow note in terms of fresh data, the rest of the week is packed with housing data, retail sales, industrial production, and regional manufacturing indexes. In addition, countless officials from the Federal Reserve are on the speaking circuit from Tuesday to Friday.

And even if the week were slow, investors would still be busy as stock prices trade at their highest levels since September 2008. The Dow, for instance, briefly crossed the 11,000 mark last Friday.

Overseas, investors are pushing equities higher after Eurozone officials agreed on how money should be lent to Greece, if they requested such a loan. Also, China announced its first monthly trade deficit since 2004. The monthly gap of $7.24 billion in March follows a surplus of $7.61 billion in February. Exports rose an annualized 24.3% while imports shot up 66.0%.

Just more than one hour before today’s opening bell, Dow futures are up 6 points to 10,959 and S&P 500 futures are up 0.25 points to 1,192.00. In the bond market, the 2 year Treasury note is -0-02 at 99-26 yielding 1.089% and the 10 year note is -0-06 at 97-26 yielding 3.906%.

The NYMEX crude oil futures contract is down 43 cents to $84.49 per barrel, and Gold is trading $1.50 higher at $1,163.40.

Key Events This Week:


2:00 ― The Treasury Budget Statement is expected to show a gap of $62 billion in March, compared with the March 2009 deficit of $192 billion and the 10-year average for the month of $108 billion. The vast improvement, unfortunately, reflects “one-off factors,” said economists from Nomura, noting favorable calendar shifts and some technical points related to TARP.

“That said, there were a few positive developments in the Treasury's daily statements,” they added. “In particular, withheld personal income taxes appear to be stabilizing ― helped by the better job market ― and corporate income tax receipts have turned higher. If these trends continue, Treasury debt issuance may decline late in the year.”

Treasury Auctions:

  • 11:30 ― 3-Month Bills
  • 11:30 ― 6-Month Bills


8:30 ― Expect the Trade Balance to widen its deficit from $37.3 billion in January to $39 billion in February, economists say. Exports and imports are both expected to rise as the global economy continues to recover, but imports are expected to rise more rapidly. 

Not all economists agree, however. Analysts at Nomura look for the gap to narrow to $37 billion as exports may have jumped more than others anticipate. “A rebound of capital goods shipments in particular points to strong demand for US products overseas,” they said.

Deutsche Bank economists are similarly optimistic and expect the report to back up their estimate of 4.5% GDP growth in the first quarter. “Surging exports are one of the key reasons growth was so strong last quarter, so if there is an upward surprise in the data, consensus forecasts could be revised significantly higher.”

12:00 ― The House Financial Services Committee holds a hearing to discuss "Second Liens and Other Barriers to Principal Reduction as an Effective Foreclosure Mitigation Program"

7:00pm ― Jeffrey Lacker, president of the Richmond Fed, speaks on the economic outlook to West Virginia business leaders in Morgantown, WV. Q&A to follow.

Treasury Auctions:

  • 11:30 ― 4-Week Bills


7:00 ― J.P. Morgan Q1 Earnings

8:30 ― Consumer Price Index should confirm that inflation has yet to manifest itself as any kind of threat to recovery. After the headline rose a tame 0.1% for both the headline and core indexes in January, the February headline is expected to come in flat and the core index should rise 0.1% again.

“Upward pressures from energy prices experienced from November through January have eased,” noted economists from BBVA. “The shelter component has been suppressed by declining rents. Furthermore, while demand has picked-up, producers have not yet regained pricing powers and wages, a producer’s primary cost, remain low.”

They also said that core inflation should remain low for the rest of the year.

Going further, Deutsche Bank economists said the inflation outlook is “extraordinarily tame, owing to the fact that prices will continue to trend lower in lagged response to the 2008- 2009 downturn.” 

8:30 ― Retail Sales are expected to grow at a rapid 1.2% in March, four times the pace increase seen in the prior month. Much of the expected gain is owed to motor vehicle sales, which shot up 13.5% in the month. But even with autos excluded, sales should expand 0.5%, compared to the 0.8% gain a month before.

“Retail sales are just one of many indicators that were depressed by severe weather in February and as such will naturally see a rebound in March,” predicted Ellen Zentner from BMTU. “Add to that an incentive war among automakers over the month and an earlier Easter holiday and retail sales should soar.”

Deutsche Bank economists said the report will have consequences for Q1 growth projections. “Strong results could lift estimates of Q1 consumption—we currently forecast nearly 3% growth—and also lead to upward revisions to current quarter consumption, since consumer spending patterns tend to have a lot of momentum.”

9:00 ― The House Financial Services Committee holds part two of their hearing discussing "Second Liens and Other Barriers to Principal Reduction as an Effective Foreclosure Mitigation Program"

9:30 ― Sandra Pianalto, president of the Cleveland Fed, speaks to the 19th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies, in New York.

10:00 ― Business Inventories are to rise 0.5% in February, following a flat January and a 0.3% decline in December. The report follows last week’s wholesale inventories report, which saw a stronger-than-anticipated 0.6% increase.

“We expect business inventories to increase by 0.4% in February as US private firms have entered a new restocking cycle,” said analysts from Nomura. “Manufacturing firms have accumulated stocks for two consecutive months and wholesalers and retailers look set to add to inventories this month.”

Economists from BBVA said businesses are beginning to re-stock as sales are finally picking up. “This trend has helped to revitalize industrial production,” they wrote. “In addition, the inventory adjustment is expected to have a positive impact on GDP in 1H10.”

10:00 ― Federal Reserve Chairman Ben Bernanke testifies before the Joint Economic Committee on the "Economic Outlook"

11:00 ― Jeffrey Lacker, president of the Richmond Fed, speaks at West Virginia University in Morgantown, WV

12:15 ― Kevin Warsh, a governor of the Federal Reserve, speaks to the 19th Annual Hyman P. Minsky Conference at the Levy Economics Institute of Bard College in New York.

1:00 ― House Financial Services Committee on"The Recently Announced Revisions to the HAMP"

1:00 ― Richard Fisher, president of the Dallas Fed, speaks on the state of the US and world economies at the Hyman P. Minsky Conference in New York.

2:00 ― The Fed’s Beige Book, an anecdotal summary of economic conditions written by each of the 12 Federal Reserve Banks, should reiterate what recent data reports have said: that economic conditions have been improving including gains in retail sales and services. The main difference between this report and the one from six weeks ago could be that recent conditions have been less adversely impacted by weather.

“The opening phrase should note that the economy expanded or increased in the survey period,” said economists from Nomura. “This would be consistent with other measures of activity for March, which have been quite strong so far. The Beige Book is usually not a major market mover, but we believe it contains valuable information about activity.” 

7:00pm ― Brian Sack, executive vice president of the markets group at the New York Federal Reserve, speaks on the economic crisis to the University of Vermont alumni group in New York.


8:30 ― The Empire State Manufacturing Index has been expanding for eight consecutive months and March should be no exception. Economists expect the index to come in at 25.0, up from 22.9 last month, largely as a result of the new orders index sprinting to 25.4 last month.

“With persistent signs of improving activity across a broadening swath of the economy, manufacturers in New York are likely to become more optimistic in April,” said economists from Nomura.”

8:30 ― Initial Jobless Claims are expected to drop 20k to 440k in the week ending April 10, according to economists. Weekly claims averaged 448k in March, 468k in February, and 476k in January, indicating a clear trend of fewer job losses during the first quarter. Note that economists believe a sustained trend below 450k losses in consistent with overall labor growth.

“Initial jobless claims jumped to 460,000 in the week ending 3 April, but this was likely to the result of distortions from the Easter holiday,” said economists from Nomura. “We will likely need a few more weeks of data before the underlying trend in claims becomes clear. The total number of jobless benefits receipts is stable at about 10.5 million.”

9:00 ― Last month’s Treasury International Capital report report indicated that net long-term TIC flows were softer than anticipated in January. The figure was $19.1 billion, a sharp drop from the $63.3 billion registered a month before. Moreover, China continued to divest. Predictions were not available for February but the headline could be a market-mover as concerns that borrowing rates could jump later this year have been heightened recently.

9:15 ― Industrial Production has been rising for nine months, but gains have been sporadic and there’s still a long way to go to reach pre-crisis levels. Economists look for a 0.8% in March, following up on a 0.1% gain in February and a 0.9% jump to start the year.

“Industrial production should post a solid gain of 0.6% despite having to buck a severe headwind from a large drop in utility output of almost 5% on much warmer weather,” said economists from IHS Global Insight, who are less optimistic than the consensus. “In contrast, manufacturing output was held back by bad weather in February and we expect it to climb more than 1% in March. The manufacturing recovery rolls on, as the solid ISM-manufacturing survey indicated.”

10:00 ― Like its cousin index from New York, the Philadelphia Fed Manufacturing Survey continues to post healthy gains. The index is expected to rise 1.1 points to 20.0 this month, well into expansion territory. More sets of eyes could be focused on this report given that the Empire State and Industrial Production reports come out on the same day.

10:30 ― Jeffrey Lacker, president of the Richmond Fed, speaks to the Bank's Credit Markets in Transition: Positioning for Recovery conference.

12:15 ― James Bullard, president of the St. Louis Fed, speaks on "Containing Risks in the New Global Financial Landscape” at the Hyman Minsky Conference.

1:00 ― The Housing Market Index, a measure of homebuilder sentiment published by the National Association of Home Builders, has been one of the most stubborn reports in recent months. In February the report moved up two points to 17, which seemed like good news until it dropped back to 15 in March. Although up from up its all-time low of 8, the index is far from indicating any sense of optimism among homebuilders. And, it’s worth noting that before the financial crisis began, a score of 15 had never been seen before.

1:40 ― Dennis Lockhart, president of the Atlanta Fed, speaks to the Pensacola Suburban West Rotary Club.

3:15 ― Jeffrey Lacker, president of the Richmond Fed, speaks in Charlotte, N.C.

8:30pm ― Janet Yellen, president of the San Francisco Fed, speaks on the economic outlook to Financial Executives International in San Francisco.


8:30 ― Housing Starts and Building Permits. Starts dropped a sharp 5.9% in February, which commentators attributed to poor weather. For the same reason, the index should rebound this month, though the anticipated gains don’t necessarily translate into sustained growth. Economists anticipate residential home construction to move up from 575,000 to 605,000, with permits to follow behind somewhat.

“Housing starts in February tumbled in the Northeast and South because of snow storms across the eastern half of the U.S. and colder than normal weather in the South,” said economists from IHS Global Insight. “Housing permits, however, will probably slip in response to new home sales sinking to record lows. Builders are being ultra-cautious not to oversupply the market.”

9:00 ― Kevin Warsh, a governor at the Federal Reserve, speaks to the Hyman Minsky Conference at the Levy Economic Institute of Bard College in New York.

10:00 ― Consumer Sentiment could rise several points this month as the public could be be feeling a little better that the economy finally added some jobs last month. The Dow dancing at the 11,000 mark doesn’t hurt either. The Reuters/U of Michigan index currently stands at 73.6 and is expected to move up to 75.0 in April.

“News of an upturn in employment in March should boost confidence in the economic recovery and expectations for income growth in the year ahead,” said economists from IHS Global Insight. “The recovery in the expectations component of the sentiment index has been lagging. A rising stock market and stabilizing home prices should also strengthen ratings of personal finances.”