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Trading Radar: Did China Sell US Treasuries Alongside Japan in May?

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

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It's Friday again, time to look ahead into next week and prepare for potentially market-moving news.

This week we saw the equity indexes in the US rally strongly and make new closing highs, albeit below the intraday highs in the S&P 500 (INDEXSP:.INX) and Dow Jones Industrials (INDEXDJX:.DJI). Treasuries, after their disaster last Friday following the June employment report, have recovered all of their losses and then some.

The most important theme for next week will be June US consumption. This morning's new Producer Price Index figures for June indicated that year-over-year prices increased to 2.5% from 1.7% the month prior, while the month-to-month growth in prices was 0.8%. By my math, 0.7% of the monthly growth was due to energy costs alone, so the monthly figure does not indicate a serious threat of inflation over the coming months.

On a continuing basis, crude oil for June delivery rose by 5.64% in May. However, with Tuesday's release of the June Consumer Price Index, it is unlikely that we'll see similar upward price pressures on consumers. The national average price of unleaded gas fell by 3.27% in the month of June so consumers probably won't see any price increases until July, if at all.

On Monday, June retail sales will be released. Currently, second-quarter personal consumption growth is tracking at 2.65% over the last year, which is considered a recessionary level of growth. However, the June employment report showed a solid 0.4% monthly gain in weekly earnings. Although the $3.45 average gain per person is only equal to an extra gallon of gasoline each week, the slight uptick in earnings should provide a positive boost for June retail figures. Economists are estimating that retail sales excluding autos and gas are expected to rise by 0.4% in June.

The first July regional manufacturing surveys will be released next week. On Monday, the New York survey will be announced, with the Philadelphia region's results released on Friday. Statistically, these two regions tend to most accurately reflect manufacturing growth in the US. Last month, production and new orders grew steadily, though manufacturers did not hire additional workers or increase overtime hours. This may negatively indicate that the production increases were a one-time event and not part of a pattern, which would be reflected in July's data.

New housing starts and building permits from June will be released starting Wednesday. In June, the Realtor and real estate agent prospective buyer traffic survey increased sharply from a reading of 44 to 52 points. Additionally, the average 30-year mortgage rate was between a range of 3.94% and 4.58% throughout June. The looming question now is whether or not higher rates will show a corresponding decrease in new mortgages and home purchases. Anecdotally, we have heard very mixed comments on housing contracts being canceled due to the higher rates and panicked buyers rushing to lock in the rate before it's too late. We'll have to see what the data shows to know for sure.

Foreign capital flows into US equities and Treasuries for the month of May will be released on Tuesday. This could be the most significant datapoint for the week. In the month of May, we saw a sharp rise in interest rates, which were not Fed-related until later in the month. Since much of this deleveraging was due to foreign sources, it will be very interesting to see where the flows match up. Additionally, the Japanese Ministry of Finance released information earlier this month that large Japanese investors sold roughly $29.9 billion of US Treasuries in May, which should be a very significant drag on Treasury flows. Moreover, the looming question is whether or not China was a seller of Treasuries in May or June.

Lastly, on Wednesday and Thursday, Fed Chairman Ben Bernanke will appear before Congress to give his semi-annual testimony describing economic and financial conditions. This week's speech from Bernanke was interpreted as dovish and sparked further gains in equities and Treasuries.

In terms of global economics, China will kick off the week with economic growth (second quarter), industrial production, and retail sales from June on Monday. Chinese real GDP is expected to have grown at a 7.5% year-over-year rate from 7.7% in the first quarter. Retail sales and industrial production are expected to continue to show explosive growth. The rest of the week is a bit more muted. The UK will release consumer and producer price indexes on Wednesday. Later in the week, the UK will release retail sales and the monthly jobless claims report.

Financial earnings kicked off today with reports from JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC). This will continue next week with Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Morgan Stanley (NYSE:MS) reporting. Other notables reporting earnings next week include Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), Verizon (NYSE:VZ), and General Electric (NYSE:GE).


MONDAY, July 15

US Economics (Time Zone: EDT)

8:30 Empire Manufacturing - July, est. 5, prior 7.84
8:30 Advance Retail Sales - June, est. 0.7%, prior 0.6%
8:30 Retail Sales Less Autos - June, est. 0.4%, prior 0.3%
8:30 Retail Sales Ex Autos and Gas - June, est. 0.4%, prior 0.3%
8:30 Retail Sales Control Group - June, est., 0.4%, prior 0.3%
10:00 Business Inventories May, est. 0.2%, prior 0.3%
11:00 Fed to purchase $750m-$1b in 2023-2031 sector
11:30 U.S. to sell $30b 3M bills, $25b 6M bills

Fed Speak

8:00am: Fed's Tarullo speaks on banking regulation in Washington

Global Economics (Time Zone: GMT)

2:00 CNY Real GDP
2:00 CNY Industrial Production
2:00 CNY Fixed Assets Inventory
2:00 CNY Retail Sales

Earnings

Cintas (CTAS) is expected to report EPS of $0.70.
Citigroup (CITI) is expected to report EPS of $1.17.
Healthcare Services (HCSG) is expected to report EPS of $0.20.
JB Hunt Transportation (JBHT) is expected to report EPS of $0.74.


TUESDAY, July 16

US Economics (Time Zone: EDT)

8:30 CPI M/m - June, est. 0.3%, prior 0.1%
8:30 CPI Ex Food & Energy M/m - June, est. 0.2%, prior 0.2%
8:30 CPI Y/y - June, est. 1.6%, prior 1.4%
8:30 CPI Ex Food & Energy Y/y - June, est. 1.6%, prior 1.7%
8:30 CPI Index Reading - June, est. 233.353, prior 232.945
8:30 CPI Core Index Reading - June, prior 233.267
9:00 Total Net TIC Flows - May, prior $12.7b
9:00 Net Long-term TIC Flows - May, prior -$37.3b
9:15 Industrial Production - June, est. 0.3%, prior 0.0%
9:15 Capacity Utilization - June, est. 77.7%, prior 77.6%
9:15 Manufacturing Production - June, est. 0.2%, prior 0.1%
10:00 NAHB Housing Market Index - July, est. 51, prior 52
11:00 Fed to purchase $1.25b-$1.75b in 2036-2043 sector
11:30 US to sell 4W bills

Fed Speak

14:15 Fed's George speaks on economic conditions and agriculture in Kansas City

Global Economics (Time Zone: GMT)

8:30 GBP Producer Price Index
8:30 GBP Consumer Price Index
9:00 EUR Euro-Zone Consumer Price Index
23:50 JPY Bank of Japan June 10-11 Minutes

Earnings

Charles Schwab (SCHW) is expected to report EPS of $0.19.
Coca-Cola (KO) is expected to report EPS of $0.64.
Commercia (CMA) is expected to report EPS of $0.69.
CSX (CSX) is expected to report EPS of $0.47.
Goldman Sachs (GS) is expected to report EPS of $2.81.
Interactive Brokers (IBKR) is expected to report EPS of $0.22.
Johnson & Johnson (JNJ) is expected to report EPS of $1.40.
Mosaic (MOS) is expected to report EPS of $1.15.
Packing Corp of America (PKG) is expected to report EPS of $0.63.
United Rentals (URI) is expected to report EPS of $1.02.
Westamerica Bancorporation (WABC) is expected to report EPS of $0.64.
Yahoo! (YHOO) is expected to report EPS of $0.26.


WEDNESDAY, July 17

US Economics (Time Zone: EDT)

7:00 MBA Mortgage Applications - July 12, prior -4%
8:30 Housing Starts, June - est. 958k, prior 914k
8:30 Housing Starts M/m - June., est. 4.8%, prior 6.8%
8:30 Building Permits - June, est. 1m, prior 974k, revised 985k
8:30 Building Permits - June, est. 1.5%, prior -3.1%, revised -2%
2:00 Fed releases beige book

Fed Speak

10:00am: Fed's Bernanke delivers semi-annual report to US House
12:30pm: Fed's Raskin speaks to Exchequer Club in Washington

Global Economics (Time Zone: GMT)

8:30 GBP Bank of England Minutes
8:30 GBP Jobless Claims
8:30 GBP ILO Unemployment

Earnings

Abbott Laboratories (ABT) is expected to report EPS of $0.44.
Albemarble (ALB) is expected to report EPS of $0.99.
American Express (AXP) is expected to report EPS of $1.21.
Astoria Financial (AF) is expected to report EPS of $0.12.
Bank of New York Mellon (BK) is expected to report EPS of $0.58.
Bank of America (BAC) is expected to report EPS of $0.25.
Cohen & Steers (CNS) is expected to report EPS of $0.44.
Core Laboratories (CLB) is expected to report EPS of $1.31.
Covanta Holdings (CVA) is expected to report EPS of $0.04.
Crown Holdings (CCK) is expected to report EPS of $0.93.
East West Bancorp (EWBC) is expected to report EPS of $0.51.
Ebay (EBAY) is expected to report EPS of $0.54.
International Business Machine (IBM) is expected to report EPS of $3.78.
Intel (INTC) is expected to report EPS of $0.39.
LaSalle Hotel (LHO) is expected to report EPS of $0.72.
M&T Bank (MTB) is expected to report EPS of $2.09.
Omnicom (OMC) is expected to report EPS of $1.09.
PNC Financial (PNC) is expected to report EPS of $1.64.
Sandisk (SNDK) is expected to report EPS of $0.88.
Steel Dynamics (STLD) is expected to report EPS of $0.13.
Textron (TXT) is expected to report EPS of $1.64.
US Bancorp (USB) is expected to report EPS of $0.76.
Textron (TXT) is expected to report EPS of $1.64.
Valmont Industries (VMI) is expected to report EPS of $2.89.
Wynn Resorts (WYNN) is expected to report EPS of $1.54.


THURSDAY, July 18

US Economics (Time Zone: EDT

8:30 Initial Jobless Claims - July 13, est. 342k, prior 360k
8:30 Continuing Claims - July 6, est. 2.955m, prior 2.977m
9:45 Bloomberg Economic Expectations – July, prior -1
9:45 Bloomberg Consumer Comfort - July 14, prior -27.3
10:00 Philadelphia Fed Index - July, est. 6.5, prior 12.5
10:00 Leading Indicators, June - est. 0.3%, prior 0.1%
13:00 US to sell $15b 10Y TIPS

Fed Speak

10:00 Fed's Bernanke delivers semi-annual report to Senate

Global Economics (Time Zone: GMT)

1:30 AUD NAB Business Confidence
6:00 CHF Trade Balance
8:30 GBP Retail Sales

Earnings

Advanced Micro Devices (AMD) is expected to report EPS of -$0.12.
AMR (AAMRQ) is expected to report EPS of $0.77.
AutoNation (AN) is expected to report EPS of $0.74.
Baxter International (BAX) is expected to report EPS of $1.13.
BB&T (BBT) is expected to report EPS of $0.74.
Blackrock (BLK) is expected to report EPS of $3.82.
Blackstone (BX) is expected to report EPS of $0.53.
Capital One (COF) is expected to report EPS of $1.71.
Celanese (CE) is expected to report EPS of $1.16.
Chipotle (CMG) is expected to report EPS of $2.80.
City National (CNY) is expected to report EPS of $0.96.
Cytec Industries (CYT) is expected to report EPS of $0.14.
Danaher (DHR) is expected to report EPS of $0.85.
Dover (DOV) is expected to report EPS of $1.30.
Google (GOOG) is expected to report EPS of $9.01.
Huntington (HBAN) is expected to report EPS of $1.64.
Intuitive Surgical (ISRG) is expected to report EPS of $0.88.
Microsoft (MSFT) is expected to report EPS of $0.75.
Morgan Stanley (TXT) is expected to report EPS of $0.44.
Nucor (NUE) is expected to report EPS of $0.30.
Philip Morris (PM) is expected to report EPS of $1.41.
Popular Inc (BPOP) is expected to report EPS of $0.69.
PPG Industries (PPG) is expected to report EPS of $2.34.
Quest Diagnostic Inc (DGX) is expected to report EPS of $1.09.
Safeway Inc (SWY) is expected to report EPS of $0.50.
Sherwin-Williams (BPOP) is expected to report EPS of $2.60.
Skyworks Solutions (SWKS) is expected to report EPS of $0.44.
Snap-On (SNA) is expected to report EPS of $1.43.
Sonoco (SON) is expected to report EPS of $0.58.
Stryker (SYK) is expected to report EPS of $0.44.
Union Pacific (UNP) is expected to report EPS of $2.35.
UnitedHealth (UNH) is expected to report EPS of $1.26.
Verizon (VZ) is expected to report EPS of $0.73.


FRIDAY, July 19

US Economics (Time Zone: EDT)

No major reports scheduled

Global Economics (Time Zone: GMT)

4:30 JPY All Industrial Activity
5:00 JPY Leading Index
8:30 GBP Public Finances
8:30 GBP Public Sector Net Borrowing
12:30 CAD Consumer Price Index
EUR G20 Finance Ministers and Central Bank's Deputies Meeting in Russia

Earnings

American Electric Power (AEP) is expected to report EPS of $0.80.
Baker Huges (BHI) is expected to report EPS of $0.64.
First Horizon (FHN) is expected to report EPS of $0.19.
First Niagara (FNFG) is expected to report EPS of $0.18.
General Electric (GE) is expected to report EPS of $0.35.
Ingersoll Rand (IR) is expected to report EPS of $1.07.
The Interpublic Group (IPG) is expected to report EPS of $0.22.
Kansas City Southern (KSU) is expected to report EPS of $0.95.
Manpowergroup (MAN) is expected to report EPS of $0.89.
NVR (NVR) is expected to report EPS of $12.38.
Rockwell Collins (COL) is expected to report EPS of $1.15.
Schlumberger (SLB) is expected to report EPS of $1.22.
State Street (STT) is expected to report EPS of $1.11.
Suntrust Banks (STI) is expected to report EPS of $0.67.
Tompkins Financial (TMP) is expected to report EPS of $0.85.
VF Corp (VFC) is expected to report EPS of $1.17.
Whirlpool (WHR) is expected to report EPS of $2.33.


Here's a look at Minyanville's top market stories from the past week:

Is There Any Hope Left for Bears?

Does Ben Bernanke Have a God Complex?

Bernanke Brings Back the Income Trade

Technicals Show Apple Inc. Looking Strong, Stocks in 'Dojiest' Rally Ever

Junk Bonds, Preferred Stocks, REITs: Why Investors Should Consider High-Yield ETFs


Twitter: @MichaelSedacca

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