Financial Professionals


What to Watch in the Week Ahead: August 15-19



After five extremely volatile trading sessions S&P 500 Index (Fig 1.1) lost 1.7% for the week of August 8. Keep in mind, many had feared the Index would suffer a much deeper decline in response to Standard & Poor's downgrade of U.S. term credit rating after the market close on Friday, August 5. This is not a market where investors should be making major decisions based on extreme intraday volatility. Pulling back on the view is warranted. Last week's 1.7% decline after the downgrade is evidence to that. However, the late-week recovery has not reversed the defensive sentiment for the market. Further price stability is needed. We must remain ever watchful of critical economic data releases and policy directives.


These events for the week of August 15-19 may determine whether price stability can be certified:


  • Japan - Finance Minister Yoshihiko Noda warned over the weekend further intervention by the Bank of Japan may be needed to halt appreciation in the Japanese yen (Fig 1.2). Further yen appreciation would be problematic for Japanese economic recovery efforts in the wake of the March earthquake.


  • Tuesday August 16, German Chancellor Angela Merkel meets with French President Nicolas Sarkozy to outline measures to "improve euro zone crisis management." A midday post meeting joint press conference may impact U.S. markets.


  • Robust U.S. manufacturing has been the foundation for the recovery since March 2009. On August 1 , the critical U.S. ISM Manufacturing (Fig 1.3) report came in at 50.9, well below the previous month's 55.3. This week two regional manufacturing reports from New York and Philadelphia will provide insight on whether further manufacturing weakness is emerging:
      • Monday, August 15, 8:30 a.m. - New York (Empire) Manufacturing Survey
      • Thursday, August 18, 10 a.m. - Philadelphia Fed Survey


  • Housing continues to bump along the bottom in a continued deleveraging process. Given the Federal Reserve's commitment to low rates until the middle of 2013, I am first looking for a potential refinance boom.
      • Tuesday, August 16, 8:30 a.m. - Housing Starts (Fig 1.4) and Building Permits (Fig 1.5)

      • Wednesday, August 17, 7:00 a.m. - Weekly Mortgage Applications

      • Thursday, August 18,10 a.m. - Existing Home Sales (Fig 1.6)

  • Inflation data - PPI will be released on Wednesday, August 17 (Fig 1.7), and CPI on Thursday, August 18 (Fig 1.8).


  • Weekly U.S. labor figures will be released in the Thursday, August 18, initial jobless claims report. Please read last week's blog for my thoughts on the last (August 11) jobless claims release.

FIG 1.1 S&P 500® INDEX, WEEK OF 8/8/11 

Source: Bloomberg

FIG 1.2 SPOT JAPANESE YEN, 8/16/10 TO 8/12/11



Source: Bloomberg


FIG 1.3 U.S. ISM MANUFACTURING, 8/31/08 TO 7/31/11


Source: Bloomberg


Fig 1.4 HOUSING STARTS, 8/31/05 TO 6/30/11


Source: Bloomberg


Fig 1.5 BUILDING PERMITS, 8/31/05 TO 6/30/11




Source: Bloomberg



Fig 1.6 EXISTING HOME SALES, 8/31/05 TO 6/30/11

Source: Bloomberg

Fig 1.7 PPI YOY, 8/31/008 TO 6/30/11


Source: Bloomberg


Fig 1.8 CPI YOY, 8/31/008 TO 6/30/11


Source: Bloomberg

Past performance is not a guarantee of future results.

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