Trading Radar: Did the Government Shutdown Slow the Economy?

By Michael Sedacca  NOV 15, 2013 4:20 PM

Economics, earnings reports, and market events for the week ahead.


In the past week, US equities continued to new highs despite generally poor earnings reports from a number of large-cap companies like Cisco (NASDAQ:CSCO) and Wal-Mart (NYSE:WMT). Treasury yields declined marginally after a number of sentiment surveys indicated the market was leaning very bearish. On Thursday, Janet Yellen's confirmation hearing drew a great deal of attention. It was very concerning from an investor perspective that the predominant theme of the hearing was whether or not different markets were in bubbles. 

Next week, the primary theme from economic data releases will be whether or not the government shutdown had a material effect on the economy. Thus far, preliminary manufacturing surveys have shown unabated growth during October. Auto sales for the month tailed off slightly, but generally remained strong. However, October and November consumer confidence indices from the University of Michigan, Bloomberg, and the Conference Board have remained significantly lower than their summer peaks.

October retail sales are due out on Wednesday. Economists are estimating that growth will have remained unchanged after declining 0.1% in September. National gasoline prices had declined by 3.48% from $3.39 to $3.275 per gallon during the month on average, which should reduce the headline figure by 0.04%. ICSC chain-store sales had been up only 0.17% during the month and Redbook same-store sales had fallen 1.7%, which isn't a strong endorsement for strong growth from clothing & merchandise during the month.

What is most concerning is the YoY growth rate for retail sales. It remains subdued at +3.2% and recorded the second lowest level of growth since 2009 in September. One thing to keep in mind for retail sales, the building materials subset typically has a strong correlation to the month's building permits and tends to move housing-related stocks.

The minutes of the October Fed meeting will be released on Wednesday at 2:00 p.m. EST. In the statement released following the meeting, the Fed removed comments about tightening financial conditions and added slightly more positive comments on the improvement of the economy. Speeches from FOMC members since then, which typically divulge the topics discussed during the meeting, have centered around "cumulative" and "significant" improvement in the labor market -- notably, St. Louis President James Bullard, who was very dovish over the summer. Additionally, comments from dovish member Dennis Lockhart indicated that there has been discussion amongst FOMC members over the efficacy of large-scale asset purchases (LSAPs). Lastly, it is clear there was serious discussion on how to explain to the market how the two main policy tools of forward guidance and LSAPs are different.

Also due for release next week are the consumer and producer price indices. Economists estimate that CPI will decline to a 1% year-over-year rate. Excluding the 2008 recession, a reading that low would be the slowest rate of consumer price increases since 1965. Producer price gains from a year ago are estimated to remain unchanged at 0.3%.

Only retail companies have yet to report earnings for the third quarter. Notable reports in the coming week include Home Depot (NYSE:HD), Urban Outfitters (NASDAQ:URBN), (NYSE:CRM), Best Buy (NYSE:BBY), Saks (NYSE:SKS), Lowe's (NYSE:LOW), Deere (NYSE:DE), JC Penney (NYSE:JCP), Target (NYSE:TGT), Abercrombie & Fitch (NYSE:ANF), and Sears Holding (NYSE:SHLD). I would pay particular attention to management comments and guidance from retailers on how they see the holiday season shaping up. Thus far the indications are not stellar. 

Monday, November 18

US Economics (Time Zone: EST)

09:00 Total Net TIC Flows – prior -$2.9B
09:00 Net Long-Term TIC Flows – prior -$8.9B
10:00 NAHB Housing Market Index – expected 56, prior 55
11:00 Fed buying $1.25b-$1.75b bonds in 23 to 30-year range
11:30 Treasury selling $32b 3-month, $28b 6-month bills
02:00 Fed buying $3b-$4b notes in 6 to 7-year range
1:00am Rosengren speaks in Abu Dhabi
12:15pm Dudley speaking in New York
1:30pm Plosser speaking in Philly
7:45pm Kocherlakota speaks in Minneapolis

Global Economics (Time Zone: GMT)

01:30 CNY October Property Prices

Tyson Foods (TSN)
Urban Outfitters (URBN) (CRM)

Tuesday, November 19

US Economics (Time Zone: EST)
08:30 Employment Cost Index (3Q) – expected 0.5%, prior 0.5%
11:00 Fed to purchase $2.75b-$3.5b notes in 8 to 10-year range
11:30 Treasury selling 4-week bills
2:15pm Evans speaks in Chicago
7:00pm Bernanke speaks in Washington

Global Economics (Time Zone: GMT)

00:30 AUD RBA Minutes from November meeting
05:00 JPY Leading Index
10:00 EUR Eurozone ZEW Economic Sentiment Survey


Home Depot (HD)
Dick’s Sporting Goods (DKS)
Best Buy (BBY)
Medtronic (MDT)
Saks (SKS)

Wednesday, November 20

US Economics (Time Zone: EST)

07:00 MBA Mortgage Applications
08:30 Retail Sales – expected 0.1%, prior -0.1%
08:30 Retail Sales ex-Auto – expected 0.1%, prior 0.4%
08:30 Retail Sales ex-Auto & Gas – expected 0.4%, prior 0.4%
08:30 CPI YoY – expected 1.0%, prior 1.2%
08:30 CPI ex-Food & Energy – expected 1.7%, prior 1.7%
10:00 Existing Home Sales saar – expected 5.16M, prior 5.29M
10:00 Existing Home Sales MoM – expected -2.5%, prior -1.9%
10:00 Business Inventories – expected 0.3%, prior 0.3%
2:00 FOMC Minutes (Oct meeting)
11:00 Fed purchasing $1.25b-$1.75b bonds in 23 to 30-year range
10:00am Dudley speaking in NY
12:10pm Bullard speaks in Chicago

Global Economics (Time Zone: GMT)

JPY Trade Balance
04:30 JPY All Industry Activity Index
09:30 GBP BoE Minutes
10:00 CHF ZEW Economic Expectations Survey


Deere (DE)
Lowe’s (LOW)
Staples (SPLS)
JCPenney (JCP)

Williams Sonoma (WSM)
Green Mountain Coffee Roasters (GMCR)

Thursday, November 21

US Economics (Time Zone: EST)

08:30 Initial Jobless Claims - expected 335k, prior 339k
08:30 Continuing Claims – expected 2875K, prior 2874K
08:30 PPI YoY – expected 0.3%, prior 0.3%
08:30 PPI Ex-Food & Energy – expected 1.3%, prior 1.2%
08:58 Markit US Preliminary PMI – expected 52.5
10:00 Philly Fed – expected 15.0, prior 19.8
11:00 Fed to purchase $4.25b-$5.25b notes in 4 to 5-year range
01:00 Treasury selling $13b 10-year TIPS (reopening)
9:45am Powell speaks in NY
12:30pm Lacker speaking in North Carolina
1:00pm Bullard speaking in Arkansas

Global Economics (Time Zone: GMT)

Japan Investors Purchases of Foreign Bonds/Stocks
Bank of Japan Rate Decision
01:45 CNY HSBC/Markit Flash Manufacturing PMI
02:00 NZD Credit Card Spending
06:00 JPY Machine Tool Orders
07:00 CHF Trade Balance
09:00 EUR Eurozone Manufacturing & Services PMI
09:30 GBP Public Sector Borrowing
15:00 EUR Eurozone Consumer Confidence
9:00am Draghi speaks in Berlin


Target (TGT)
Sears Holdings (SHLD)
Abercrombie & Fitch (ANF)
Gap (GPS)
Ross Stores (ROST)
Autodesk (ADSK)
Pandora (P)
Splunk (SPLK)
Gamestop (GME)
Fresh Market (TFM)

Friday, November 22

US Economics (Time Zone: EST)

10:00 JOLTs Job Openings – prior 3883
11:00 Kansas City Fed – expected 5, prior 6
11:00 Fed purchasing $1.25b-$1.75b bonds in 23 to 30-year range

Global Economics (Time Zone: GMT)

JPY Small Business Confidence Index
07:00 EUR German GDP (final estimate)
09:00 EUR German IFO Economic Expectations
13:30 CAD CPI
13:30 CAD Retail Sales


Foot Locker (FL)

Twitter: @MichaelSedacca

No positions in stocks mentioned.

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