For the Week of November 2-6


For the Week of November 2-6

The events that matter most to Investors.

Economic Events

There are three rather important and potentially market moving events this week:  Monday's ISM report, Wednesday's FOMC statement, and Friday's unemployment report. Let's take a look at each.

Positive momentum surrounds Monday's release; the pressure is on for an upside surprise. The improvement in manufacturing has been recognized by the market so far this fall. Continued expansion is expected, with a number near 53. Last month's number was 52.6. We may need a number north of 53.8 to get the market excited. Last week's GDP suggests strength in manufacturing with further upside possible as an inventory re-stocking cycle unfolds into 2010.

Source:  Bloomberg

Following is the statement from September 23, 2009 FOMC meeting with key points highlighted courtesy of Bloomberg. What I am looking for is any change in language:

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."  Do they change the last two words from extended period to something less time certain?

September 23 Text:
Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets, and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. The committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. As previously announced, the Federal Reserve's purchases of $300 billion of Treasury securities will be completed by the end of October 2009. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Goldman Sachs rattled the markets on Friday calling for a worse than consensus unemployment report this Friday. The street was looking for job losses of 175,000, however Goldman Sachs is looking for 200,000. Consensus for the Main Street headline-grabbing unemployment rate is looking to climb to 9.9% or maybe even 10%.

The 3rd quarter earnings season is winding down with not much out there to suggest any further "market impacting" surprises. This was an excellent reporting season, particularly in the technology sector. Within that sector, most of the top line surprises appeared. Overall, the early strength in earnings placed support underneath the market during a historically challenging period on the calendar.  For the upcoming week reports investors should pay attention to include:

Monday - Ford
Tuesday - Hartford Financial, MasterCard
Wednesday - Time Warner Inc, Comcast, Pulte Homes, Cisco, Qualcomm, XTO Energy
Thursday - Time Warner Cable, Sunoco, Starbucks
Friday - EOG Resources


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