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The Week Ahead: August 23

08/22/2010

The capital markets continue to navigate through a period of heightened sensitivity to every economic report. The week ahead presents the following economic data:

Tuesday, August 24      

10am EST - Existing Home Sales Month over month:  Previous (5.1%); Consensus estimate current (12.5%)

• Expect a dismal report, at best.  In fact, the measure of purchases for existing homes might challenge its lowest annual pace for 2010. Housing will remain a "known headwind" for many months to come.


Source: Bloomberg 

Wednesday, August 25

8:30am EST - Durable Goods Orders  Previous (1.0%);  Consensus estimate current +3%

• Capital spending on equipment to increase productivity has been robust since late 2008. The recent quarterly earnings report for Caterpillar (CAT) was evidence of the strength in machinery.
• Corporations producing durable goods are outperforming the S&P 500 Index year to date.
• S&P 500 Index (3.893%), CAT +20.828%, Eaton (ETN) +14.807%, Deere (DE) +20.41%, Joy Global (JOYG) +15.629%.


Source: Bloomberg

10am EST  - New Home Sales Month over month:  Previous 23.6%; Consensus estimate current -1%

• The expiration of the $8,000 government tax credit has depressed new home sales.   In addition, the absence of a recovery in the U.S. employment market will discourage consumers from purchasing a new home.
 

Thursday August 26    

8:30am EST - Initial Jobless Claims   Previous 500,000; Consensus estimate current 490,000

• The chart below measures the four week moving average for Initial Jobless Claims. An obvious uncomfortable rise since the 4th of July is placing this weekly report in prime sight for investors. Again it takes the position as the "highlighted economic report" of the week. The hope is that the 500K number on August 19 was a one-off. Either way, job creation is now front and center and will be the focus for the upcoming November elections.


Source: Bloomberg

Friday August 27         

Fed Bank of Kansas City's annual symposium in Jackson Hole, Wyoming:  Federal Reserve Chairman Ben Bernanke attends and speaks.

8:30am EST - GDP Q2 (QoQ Annualized) Previous 2.4%; Consensus estimate current 1.1%

• The economic data in recent weeks continues to suggest that the economy grew less than previously forecasted. Analysts have been marking down 2nd Quarter GDP from the mid 2's now toward 1%. Following is a table of recent GDP results.

     - Q1 2010 +3.7%
     - Q4 2009 +5.0% 
     - Q3 2009 +1.6%
     - Q2 2009 (0.7%)
     - Q1 2009 (4.9%)
     - Q4 2008 (6.8%)
     - Q3 2008 (4.0%)
     - Q2 2008 +0.6% 
     - Q1 2008 (0.7%)
     - Q4 2007 +2.9%
     - Q3 2007 +2.3%
     - Q2 2007 +3.2%
     - Q1 2007 +0.9%
     - Q4 2006 +3.0%          

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.