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Trading Radar: Investors Focused on Upcoming ECB Rate Decision

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

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US stocks traded very erratically this past week and are down a bit more than 3% to start the year. Jeff Saut noted in his commentary this morning on the Buzz & Banter (subscription required) that a trade below December 2013's low and a negative performance in January is an ominous sign for the rest of the year.

Next week will be very busy, and the scheduled events should contribute to the already growing market volatility. On Friday, the January nonfarm payroll report is scheduled to be released. The consensus economist estimate is for a net gain of 180,000. The prior month of 74,000 could be revised higher due to the extreme cold weather. However, it is unlikely that the Fed will change course unless the payroll gain in the month is well below estimates. Two other important reports for the week are the ISM manufacturing and services composites. The former is expected to show a little bit less growth from the prior month, while the latter is forecast to rise marginally.

The main event elsewhere in the world is the ECB rate decision on Thursday. Due to slackening inflation and rising money market rates, there is increasing pressure on the central bank to "do something." Because the German Constitutional Court has not ruled on the OMT bond buying program and won't until April, the ECB governing council will not be able to hint at its use. More likely, it will choose to make direct loans to banks -- similar to the Bank of England's practice -- or additional long-term refinancing operations. Additionally, the Bundesbank hinted today that the ECB may choose not to sterilize its existing SMP bond holdings, which currently total 177.4 billion euros. By not sterilizing the purchases, the ECB would be injecting that money into the financial system. (In this author's opinion, it's highly unlikely that the ECB chooses to make a marginal cut to its policy rates as they are already near zero anyway so the effect is essentially nil.)

The Reserve Bank of Australia will also make its rate decision on Tuesday morning. Because of persistently strong inflation in the country as of late, the expectation is that it may be closer to hiking rates than cutting them. Many investors are short the Aussie dollar vs. the Japanese yen, so this would cause those positions to be unwound.

Earnings are also another key factor in the week, though most of the significant large-cap companies have already reported. The headline report for the week is Twitter (NYSE:TWTR), which is scheduled to report earnings for the first time as a public company next Wednesday in the post-market. Other notable names include Yum Brands (NYSE:YUM), HCA Holdings (NYSE:HCA), Merck (NYSE:MRK), Walt Disney (NYSE:DIS), General Motors (NYSE:GM), LinkedIn (NYSE:LNKD), and Dunkin Brands (NASDAQ:DNKN).

Monday, February 3

US Economics (Time Zone: EST)

08:58 Markit US PMI Final (Jan) - expected 53.8, preliminary 53.7
10:00 ISM Manufacturing (Jan) - exp 56.0, prior 57.0
10:00 ISM Prices Paid - exp 54.0, prior 53.5
10:00 Construction Spending (Dec) - exp 0.0%, prior 1.0%
Total Vehicle Sales - exp 15.7M, prior 15.3M
Domestic Vehicle Sales - exp 12M, prior 11.65M
11:00 Fed to purchase $1b-$1.5b bonds in 23 to 30-year range
11:30 Treasury selling $28b 3-month, $20b 6-month bills

Global Economics (Time Zone: GMT)

CNY Manufacturing PMI
01:00 CNY Non-manufacturing PMI
09:00 EUR Eurozone Manufacturing PMI (final estimate)
09:30 GBP Manufacturing PMI

Earnings

Before:
Sysco (SYY)

After:
Anadarko Petroleum (APC)
Yum! Brands (YUM)
American Capital Agency (AGNC)

Tuesday, February 4

US Economics (Time Zone: EST)

10:00 Factory Orders - expected -1.6%, prior 1.8%
11:00 Fed to purchase $2.25b-$3b notes in 7 to 10-year range
11:30 Treasury selling $18b 52-week and 4-week bills

Fedspeak

8:30am Lacker (hawk, nonvoter) speaking in Virginia
12:30pm Evans (dove, nonvoter) speaking in Detroit

Global Economics (Time Zone: GMT)

JPY Monetary Base (Jan)
03:30 AUD RBA Rate Decision
09:30 GBP Construction PMI

Earnings

Before:
Archer-Daniels-Midland (ADM)
Emerson Electric (EMR)
International Paper (IP)
AGCO (AGCO)
Sirius XM (SIRI)
Arch Coal (ACI)
CME Group (CME)
HCA Holdings (HCA)
McGraw Hill Financial (MHFI)

After:
Gilead Sciences (GILD)
Buffalo Wild Wings (BWLD)

Wednesday, February 5

US Economics (Time Zone: EST)

07:00 MBA Mortgage Applications
08:15 ADP Employment Change - expected 190K, prior 238K
10:00 ISM Non-manufacturing Composite - exp 53.7, prior 53.0
11:00 Fed buying $2.25b-$3b notes in 7.5 to 10-year range

Fedspeak

12:30pm Plosser (moderate hawk, voter) speaks in NY
1:40pm Lockhart (dove, nonvoter) speaks in Alabama

Global Economics (Time Zone: GMT)

NZD Employment Change
09:00 EUR Eurozone Services PMI (final)
09:30 GBP Services PMI
10:00 EUR Eurozone Retail Sales

Earnings

Before:
Merck (MRK)
Time Warner (TWX)
Humana (HUM)
Ralph Lauren (RL)

After:
Allstate (ALL)
Walt Disney (DIS)
Tesoro (TSO)
Marathon Oil (MRO)
Atmel (ATML)
Green Mountain Coffee Roasters (GMCR)
Prudential Financial (PRU)
Akamai Tech (AKAM)
Shutterfly (SFLY)
Twitter (TWTR)
Pandora (P)
Yelp (YELP)

Thursday, February 6

US Economics (Time Zone: EST)

07:30 Challenger Job Cuts YoY - prior -5.9%
08:30 Initial Jobless Claims - expected 335K, prior 348K
08:30 Continuing Claims - exp 3025K, prior 2991K
08:30 Trade Balance (Dec) - exp -$36B, prior -$34.3B
08:30 Nonfarm Productivity (4Q preliminary) - exp 2.5%, prior 3.0%
08:30 Unit Labor Costs - exp -0.5%, prior -1.4%
11:00 Fed buying $1b-$1.5b bonds in 23 to 30-year range

Fedspeak

5:30pm Rosengren (dove, nonvoter) speaks in Sarasota, FL

Global Economics (Time Zone: GMT)

JPY Japanese Investors Purchases of Foreign Bonds/Stocks
00:30 AUD Trade Balance
00:30 AUD Retail Sales
07:00 CHF Trade Balance
11:00 EUR German Factory Orders
12:00 GBP BoE Rate Decision
12:45 EUR ECB Rate Decision
15:00 CAD Ivey PMI

Earnings

Before:
Cummins (CMI)
Noble Energy (NBL)
Exelon (EXC)
Nu Skin Enterprises (NUS)
Advance Auto Parts (AAP)
Alliance Data Systems (ADS)
General Motors (GM)
Aetna (AET)
Kellogg (K)
Twenty-First Century Fox (FOXA)
Ally Financial (ALYF)

After:
Activision Blizzard (ATVI)
Lions Gate (LGF)
Tempur Sealy (TPX)
LinkedIn (LNKD)
Expedia (EXPE)

News Corp (NWSA)
AOL (AOL)
Dunkin Brands (DNKN)

Friday, February 7

US Economics (Time Zone: EST)

08:30 DOL announces employment annual revisions
08:30 Nonfarm Payrolls - expected 184K, prior 74K
08:30 Private Payrolls - exp 190K, prior 87K
08:30 Manufacturing Payrolls - exp 10K, prior 9K
08:30 Unemployment Rate - exp 6.7%, prior 6.7%
08:30 Average Hourly Earnings YoY
3:00 Consumer Credit - exp $12B, prior $12.31B

Global Economics (Time Zone: GMT)

00:30 AUD RBA Statement on Monetary Policy
01:45 CNY HSBC/Markit Services PMI
05:00 JPY Leading Index (Dec preliminary)
07:00 EUR German Trade Balance
09:30 GBP Trade Balance
09:30 GBP Industrial and Manufacturing Production
11:00 EUR German Industrial Production
15:00 GBP NIESR GDP Estimate

Earnings

Before:
Apollo Global (APO)
Wyndham Worldwide (WYN)
Madison Square Garden (MSG)


Twitter: @MichaelSedacca

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