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Monday: Retail Sales, Empire State Mfg. Survey, Business Inventories

Tuesday: ICSC-Goldman Store Sales, Redbook, Producer Price Index, Industrial Production, Housing Market Index

Wednesday: Consumer Price Index, Housing Starts, MBA Purchase Applications, EIA Petroleum Status Report

Thursday: Jobless Claims, Leading Indicators, Philadelphia Fed Survey

Friday: None

The week got off to a busy start, though the data was mixed Monday. Business inventories for September fell 0.4 percent, half the decline that was expected and a quarter of the decline seen in August. However, sales fell 0.3 percent, which left the stock-to-sales ratio at 1.32. This data doesn't get a lot of attention given its delay in release. Interestingly, auto dealers and auto parts stores saw large gains in inventory levels, which prepared them well for the strong sales seen in October.

Retail sales rose 1.4 percent during October, which was above estimates for a reading of 0.9 percent. In September, retail sales fell 2.3 percent, which was a result of a 14.3 percent decline in auto sales. The most recent report benefited from a 7.4 percent rebound in auto sales. Retail sales less autos rose just 0.2 percent, half of what was expected. Year on year, retail sales fell 1.7 percent in October, but this was a sharp improvement from the 6.3 percent decline seen in September. Overall, the consumer remains cautious, which is understandable given the weakness still seen in the jobs market. Much like last year, economists feel that consumers will be looking for deals during the holiday shopping season.

The manufacturing sector has been a bright spot during the economy recovery. This sector of the economy was the first to emerge, but recent data has show some give back. The Empire State Mfg. Survey came in at 23.51 in November. This is in expansion territory and well above the -9.4 reading seen back in June. However, it was an 11.1 points decline from October's reading of 34.6. New orders lost more than half their value at 16.66 compared with 34.57 in October. Data on the manufacturing sector will continue this week with the Philly Fed Survey out Thursday and Tuesday seeing the release of the industrial production report.

Industrial production for October is expected to show a gain of 0.4 percent following a 0.7 percent gain in September. If this holds true, it will be the fourth consecutive month of gains for this report. The industrial sector went through its worst slump since just after World War II, but things have improved substantially in the past four months. Much of this has to do with subsidies by the U.S. government and now that many of these programs have ended, we will get a better idea of how the economy is holding up. Recent data has shown improvements in business spending on equipment and exports have increased. This doesn't mean that the problem is solved, but at least it seems like we are on the right track.

The housing sector saw dramatic declines in activity during the recession with new home sales down 80 percent over the past three years. However, thanks to incentives from the government, new home sales seemed to bottom in the spring with sales up 23 percent since that time. The $8,000 first time home buyer credit has been extended past its initial Nov. 30 expiration, which should continue to benefit new home sales. However, for October, housing starts are expected to come in at 600,000 units on an annualized basis, just above September's reading of 590,000 units. Nonetheless, this would be the highest number of housing starts in nearly a year. Ahead of this report, we will get a look at housing activity from the housing market index, which provides a view of the sector from the National Association of Home Builders.

Leading indicators in October are expected to show a gain of 0.4 percent following a 1.0 percent rise in September. If this holds true, it would be the seventh consecutive month of gains for leading indicators, another sign that the recession is over. Traders will also be watching the release of weekly jobless claims. Expectations are for a flat reading with the prior week at a gain of 504,000 claims. Claims have come down off their highs seen early in the year above 650,000, but they remain high on a historic basis with payrolls continuing to show monthly declines.

We will get data on inflationary pressures, but this data is on the back burner for many traders. Producer prices are expected to show a rise of 0.5 percent in October with the core rate set to rise 0.1 percent. Consumer prices are set to rise 0.2 percent and 0.1 percent overall and at the core. Though there are concerns about how inflation will impact the economy down the road, right now traders are more concerned with economic growth and what is needed to get people back to work.

Jody Osborne
Optionetics.com ~ Your Options Education Site

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