Key U.S. Data Releases and Events

Corporate earnings reports had a generally positive spin last week, but weak results from Bank of America and the GE finance unit at week's end reminded markets of the ongoing heavy drag on earnings and banking system capital from rising loan-loss provisions.

Next week will be another heavy earnings reporting week. Key bellwether stocks such as Apple, Microsoft, AT&T, DuPont, Dow Chemical, Caterpillar, Case New Holland, Honeywell, and Boeing are expected to set the tone for the nonfinancial industrials. A number of regional banks will be reporting next week, and those reports will be scrutinized carefully with respect to rising pressures from loan-loss provisions on consumer and commercial real estate lending.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, October 20 – Housing Starts and Building Permits (Sep.)

Starts

• IHS Global Insight: 0.609 Mil.
• Consensus: 0.610 Mil.
• Last Actual: 0.598 Mil. (Aug.)

Permits

• IHS Global Insight: 0.594 Mil.
• Consensus: 0.590 Mil.
• Last Actual: 0.579 Mil. (Aug.)

What to Look For

• Both starts and permits are expected to move up in response to low inventories of new homes.

Implications

Single-family permits—the key item in the housing starts report—were flat in August, after posting four straight solid gains. This flat reading might be related to the tax credit for first-time homebuyers. A home started in August, unless pre-sold, would probably not be completed and sold by the time the credit expires November 30, but one started in July or earlier probably could. Nevertheless, for September, we project increases in starts (to 609,000, annual rate) and permits (to 594,000, annual rate), based on the low level of inventories of new homes, which have fallen to their lowest since 1983.

Tuesday, October 20 – Producer Price Index (Sep.)

Total

• IHS Global Insight: -0.3%
• Consensus: -0.1%
• Last Actual: +1.7% (Aug.)

Core

• IHS Global Insight: +0.2%
• Consensus: +0.1%
• Last Actual: +0.2% (Aug.)

What to Look For

• Top-level index to decline 0.3% on lower energy costs.
• Core prices to rise a modest 0.2%.

Implications

The producer price index is projected to fall 0.3% in September. Lower gasoline and natural gas prices should drag the energy category into negative territory. Food prices are also likely to erase some portion of last month's gain. Excluding food and energy, core producer prices are expected to rise 0.2%, as in August.

Friday, October 23 – Existing Home Sales (Sep.)

• IHS Global Insight: 5.40 Mil.
• Consensus: 5.36 Mil.
• Last Actual: 5.10 Mil. (Aug.)

What to Look For

• Sales are expected to move up by a solid 5.9%.

Implications

The pending home sales index increased for the seventh straight month in August, a sign that demand for housing continues to grow. Based on this, we project a solid 5.9% increase in existing home sales for September. Sales should continue to increase through November, when the tax credit for first-time homebuyers expires. But sales will sag in 2010, unless the credit is extended. A number of proposals are now being floated along these lines, but it is a little early to see where Congress will land on this, especially with the priority currently being given to the healthcare reform bill.