The economic release schedule for the week of August 5th is as follows:
- Monday: ISM Non-Mfg Index and Richard Fisher Speaks
- Tuesday: ICSC-Goldman Store Sales, International Trade, JOLTS, 3-Yr Note Auction, Treasury STRIPS, and Charles Evans speak
- Wednesday: MBA Purchase Applications, Consumer Credit, 10-Yr Note Auction, Charles Plosser Speaks, and Sandra Pianalto speak
- Thursday: Weekly Jobless Claims, 30-Yr Bond Auction, and Fed Balance Sheet
- Friday: Wholesale Trade
I spoke with Gordon Charlop Ph.D., Managing Director, Rosenblatt Securities, and frequent CNBC commentator, about what he will be watching next week. On the economic calendar, there are a few key pieces of data Charlop will focus on, including the overall market, weekly jobless claims and Federal Reserve speakers.
As we are coming to the final stretch of the second quarter earnings season, Charlop said there is a massive “short squeeze” going on right now, which is pushing equity markets higher. The Federal Reserve (“Fed”) reiterated that the agency is staying the course with its asset purchase program in a statement on Wednesday, which also helped boost stocks. According to Charlop, market participants misinterpreted the Fed’s announcement in May and caused a correction in equities. Now that investors have settled down a little, the equity markets are starting to climb again. Earnings season was better than expected as companies continued to impress investors. He is forecasting the trend to go higher and at some point it will hit an equilibrium. The credit market is the key for the equity market, as it is creating a tremendous buying opportunity.
Weekly Jobless Claims
This market is all about jobs and this past week the jobless claims numbers were weaker than expected, but the employment rate decreased from 7.6% to 7.4%. According to the Labor Department, applications for unemployment insurance payments declined in the week ended July 27th, the fewest since January 2008. Charlop said he knows of two individuals who have called him and said they found jobs, which they actually like. If the jobs market continues to improve, it might entice the Fed to taper its stimulus program earlier than forecasted.
Fed Speakers
Next week, several Fed officials are scheduled to speak, including Richard Fisher, Charles Evans, Charles Plosser Speaks, and Sandra Pianalto. Charlop believes Fed officials will be selling confidence to investors. The officials are going to say that what the agency has been doing is working, and the central bank will not get out too soon to derail its stimulus program. The Fed will look at the data and adjust its asset purchase program appropriately. Investors will be very interested to know what the Fed has to say for more clarity on tapering.
Who is the Next Fed Chief?
The administration knows who it wants to replace Fed Chairman Ben Bernanke. However, they are playing it straight down the line, not favoring any particular candidate. Charlop believes Vice Chairman of the Fed Janet Yellen and former Obama economic advisor Lawrence Summers are the two top candidates for the job. However, Janet Yellen has the edge. This is a hot seat job and whoever gets selected, will have a difficult time, as the head of the agency will oversee the winding down of the central bank’s stimulus program.
Final Word from the Trading Floor
Charlop is starting to see good participation from institutional clients. This market is getting interesting and could swing either direction in a short period of time. Traders are getting a pretty good feeling about the vitality of the market. He is expecting this trend to continue through the end of the year. He is hoping it will encourage retail participation as well.