Summer Signals from the Fed

Estimated reading time: 6 minutes

The traditional dog days of August are here, but even as some head out for late-summer vacations and trading volumes cool down, the economic calendar has more in store for us.

At a Glance

• The news: The Federal Reserve releases the minutes from its previous meeting on Wednesday, accompanied by key housing and regional activity data throughout the week.
• The context: Given July’s 9-3 decision to leave benchmark interest rates unchanged and Chairman Kevin Warsh’s refusal to give forward guidance, much effort will go toward parsing through how seriously central bankers are considering raising interest rates.
• Your move: Watch the homebuilders and other mortgage-sensitive assets closely. A meaningful improvement in the housing data and declining interest rate expectations would be a boon for the industries’ struggling stocks.

Last month’s Fed meeting marked another hold on interest rates, the fifth straight with no change in interest rates. Still, the vibes around these meetings have changed. 

We came into the year talking about rate cuts — now the conversation is about whether or not to hike. And how did those internal debates take shape under new Chairman Warsh? We know some FOMC members wanted a hike at the last meeting, and though that didn’t come to pass, the details to come (what the other members said about future rate hikes) will be top of mind. Any hawkish or dovish surprises buried in the text could quickly wake up what is otherwise shaping up to be a sleepy market environment.

Also dropping this week will be a mix of economic data, albeit of the non-marquee kind. On Monday and Tuesday we will get housing data in the form of the the NAHB Housing Market Index, which shows how homebuilders feel about single-family sales and buyer activity. And data on building permits, housing starts, and completions will help shed light on current and future construction activity.

Regional surveys help round out the picture, with data from the New York and Philadelphia Feds giving reads on early August trends in new business orders, employment, and prices in their districts. Given the ongoing inflation problem, the price data will be of particular importance. If cost pressure remains elevated, it could reinforce the notion that inflation won’t come down on its own — and that the Fed has to do something about it.

On the Docket

Monday

• 8:30am ET | August Empire State Manufacturing Activity: The New York Fed surveys manufacturing executives in the region on business conditions and their outlook. 
• 10:00am ET | August NAHB Housing Market Index: This index tracks how homebuilders feel about the current and future state of the single-family housing market.

Tuesday

• 8:15am ET | ADP Weekly Employment Change: This survey offers insight into weekly private sector employment trends. 
• 8:30am ET | August New York Services Activity: The New York Fed surveys executives in the region’s services industry on business conditions and their outlook.
•  8:30am ET | July Import/Export Price Indexes: These indexes track the changes in the prices of nonmilitary goods and services traded between the U.S. and the rest of the world. 
• 8:30am ET | July Building Permits and Housing Starts: Construction data is a leading indicator of economic activity. 
• 9:15am ET | July Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity.
• Earnings
  • Mega-Caps: Home Depot (HD)
  • Large & Mid-Caps: Keysight Technologies (KEYS)

Wednesday

• 7:00am ET | Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market. 
• 2:00pm ET | FOMC Meeting Minutes: The Federal Reserve releases detailed notes of every FOMC meeting three weeks after their conclusion. Investors often look for more information on Fed officials’ views for hints on the outlook for interest rates and the economy.
• Earnings
  • Large & Mid-Caps: Analog Devices (ADI), TJX Companies (TJX), Lowe’s Companies (LOW), Target (TGT), Estee Lauder Companies (EL), Nordson (NDSN), Jack Henry & Associates (JKHY)

Thursday

• 8:30am ET | August Philadelphia Fed Manufacturing Activity: The Philadelphia Fed surveys manufacturing executives in the region on business conditions and their outlook.  
• 8:30am ET | Weekly Jobless Claims: This high-frequency labor market data gives insight into initial and continuing filings for unemployment benefits. 
• 10:00am ET | July Leading Economic Index: This is an index composed of various economic indicators that have historically led changes in the broader economy.
• Earnings
  • Mega-Caps: Walmart (WMT)
  • Large & Mid-Caps: Deere & Company (DE), Ross Stores (ROST)

Friday

• 9:45am ET | August S&P Global US PMIs: These indexes track how purchasing managers across different industries feel about the business environment.

Note: Companies with at least $200 billion in market capitalization are classified as “Mega-Caps,” while others are shown in the “Large & Mid-Caps” sections.

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