WHAT’S ON TAP?

It’s another busy week with almost 20% of the S&P 500 reporting earnings and the first jobs report of 2010 as we see the jobs situation for January.  Let’s take a look at what’s on tap:

In conjunction with Econoday:

Looking Ahead: Week of February 1 through 5

This week is bookended with heavy-hitting indicators.  On Monday, personal income and ISM manufacturing get trading off to a fast start.  After a steady barrage of news during the week, the highlight is Friday’s employment situation for January.

Monday

Personal Income and Outlays 8:30 AM ET

ISM Mfg Index 10:00 AM ET

Construction Spending 10:00 AM ET

Personal income in November posted a gain of 0.4 percent, following a rise of 0.3 percent the month before.   The important wages and salaries component advanced 0.3 percent after a 0.1 percent increase in October.  Keeping in line with earlier reported gains in retail sales and motor vehicles sales, personal consumption jumped a healthy 0.5 percent, following a 0.6 percent increase in October. Inflation eased in November as headline PCE price inflation slowed to 0.2 percent from 0.3 percent in October.   Core PCE inflation decelerated to no change in November from up 0.2 percent the prior month.  Looking ahead, personal income growth is likely to be positive but more moderate as suggested by a December rise in aggregate weekly earnings of only 0.2 percent.  Personal consumption expenditures (current dollar) should be up about 0.6 percent based on previously released fourth quarter PCEs although revisions to monthly numbers could shift strength within the quarter.  Expect soft inflation numbers—the December headline CPI and core CPI both came in at 0.1 percent.

Personal income Consensus Forecast for December 09: +0.3 percent

Range: +0.2 to +0.5 percent

Personal consumption expenditures Consensus Forecast for December 09: +0.3 percent

Range: 0.0 to +0.6 percent

Core PCE price index Consensus Forecast for December 09: +0.1 percent

Range: 0.0 to +0.1 percent

The composite index from the ISM manufacturing survey posted solid month-to-month growth in December, rising to 55.9 from the 53.6 reading in November. The composite has been in positive growth territory for five consecutive months.  Healthy results are likely for January based on the forward momentum suggested by December’s ISM new orders index which jumped 5.2 points to 65.5—indicating moderately strong growth.

ISM manufacturing composite index Consensus Forecast for January 10: 55.0

Range: 54.0 to 57.0

Construction spending for November fell 0.6 percent, following a decline of 0.5 percent the month before. In the latest month, private residential spending fell 1.6 percent, public outlays dipped 0.4 percent, and private nonresidential outlays were flat.   Analysts are a expecting broad-based decline for December due in part to unseasonably bad weather.  A dip in starts in December should tug down on residential outlays.  High vacancy rates and tight credit continues to weigh on multifamily construction and nonresidential outlays.

Construction spending Consensus Forecast for December 09: -0.5 percent

Range: -2.8 to 0.0 percent

Tuesday

Motor Vehicle Sales

ICSC-Goldman Store Sales 7:45 AM ET

Redbook 8:55 AM ET

Tim Geithner Speaks 10:00 AM ET

Paul Volcker Speaks 10:00 AM ET

Pending Home Sales Index 10:00 AM ET

Sales of domestic light motor vehicles in December rose to a seasonally adjusted 8.4 million annual unit rate from an 8.2 million rate in November.  Combined import and domestic sales advanced to an 11.2 million unit pace in December from 10.9 million the month before.  With income growth sluggish and unemployment still high, analysts are not expecting improvement in sales for January.

Motor vehicle domestic sales Consensus Forecast for January 10: 8.37 million-unit rate

Range: 7.90 to 8.50 million-unit rate

Wednesday

Challenger Job-Cut Report 7:30 AM ET

ADP Employment Report 8:15 AM ET

ISM Non-Mfg Index 10:00 AM ET

EIA Petroleum Status Report 10:30 AM ET

The composite index from the ISM nonmanufacturing survey in December rose 1.4 points to 50.1, a level indicating very little month-to-month change in overall activity for the bulk of the economy. We may see some progress in January based on a surge in the Chicago PMI.  Although this index covers both manufacturing and nonmanufacturing, a 2.8 point jump to 61.5 suggests at least some improvement in nonmanufacturing.  However, the ISM nonmanufacturing new orders index has been soft recently, barely above breakeven.

ISM non-manufacturing composite index Consensus Forecast for January 10: 51.0

Range: 49.0 to 52.0

Thursday

Chain Store Sales

Monster Employment Index 6:00 AM ET

BOE Announcement 7:00 AM ET

ECB Announcement 7:45 AM ET

Jobless Claims 8:30 AM ET

Productivity and Costs 8:30 AM ET

Factory Orders 10:00 AM ET

EIA Natural Gas Report 10:30 AM ET

Initial jobless claims fell 8,000 in the January 23 week to 470,000. The improvement was smaller than expected given that the January 16 week was inflated by holiday processing delays, which the Labor Department said have now eased. The four-week average, up 9,500 to 456,250, rose for the second straight week.  Recently, initial claims have oscillated in a narrow range, not continuing an earlier downtrend.

Jobless Claims Consensus Forecast for 1/30/09: 455,000

Range: 440,000 to 475,000

Nonfarm productivity in the Labor Department’s final estimate for the third quarter was revised down but was still robust with an annualized 8.1 percent surge. Unit labor costs were revised up somewhat (less negative) to an annualized decline of 2.5 percent.  Fourth quarter numbers should be comparable or even better, based on the fourth quarter GDP growth rate of 5.7 percent annualized.  While a strong gain in the output component of productivity and unit labor costs will not be a surprise, analysts also will be looking to see what companies are doing with labor hours and whether that is leveling off.

Nonfarm Productivity Consensus Forecast for initial Q4 09: +7.0 percent annual rate

Range: +4.1 to +8.1 percent annual rate

Unit Labor Costs Consensus Forecast for initial Q4 09: -3.8 percent annual rate

Range: -5.0 to +3.5 percent annual rate

Factory orders rose 1.1 percent in November, led by a huge surge in nondurables orders tied largely to price hikes for petroleum and coal products.  Durables edged up only 0.2 percent in November, according to the estimate for the overall factory orders report.  More recent data suggest another gain for overall orders in December but a downward revision to November. In the more recent advance report, new orders for durable goods in December rebounded 0.3 percent after a downwardly revised 0.4 percent drop in November.  Higher oil prices in December also should support nondurables orders.

Factory orders Consensus Forecast for December 09: +0.3 percent

Range: -0.6 to +3.0 percent

Friday

Tim Geithner Speaks

Employment Situation 8:30 AM ET

Consumer Credit 3:00 PM ET

Nonfarm payroll employment should be interesting in this week’s jobs report for January.  Not only will traders be watching to see if job growth returns to positive territory but benchmark revisions also will be seen in the latest numbers.  Nonfarm payroll employment in December fell 85,000, following a revised gain of 4,000 in November and a revised fall of 127,000 in October.  November’s rise in jobs ended a 22-month streak of declines but revisions could do away with that modest gain.  A big question, however, is whether benchmark revisions are significant. During recession, the estimates for jobs from new firm are often over estimated, leading to downward revisions when benchmark data are released. Growth in average hourly earnings in December came in at 0.2 percent.  From the household survey, the unemployment rate was unchanged at 10.0 in December.  Looking ahead, market estimates for the jobs report might be affected by ISM employment indexes, Challenger, ADP, Monster, and initial claims prior to Friday.

Nonfarm payrolls Consensus Forecast for January 10: 0,000 (flat)

Range: -40,000 to +75,000

Unemployment rate Consensus Forecast for January 10: 10.1 percent

Range: 9.9 to 10.2 percent

Average workweek Consensus Forecast for January 10: 33.2 hours

Range: 33.2 to 33.3 hours

Average hourly earnings Consensus Forecast for January 10: +0.2 percent

Range: +0.1 to +0.2 percent

Consumer credit outstanding contracted at an accelerated pace in November, plunging $17.5 billion, following a $4.2 billion contraction in October.  November’s fall was the tenth contraction in a row.  Weakness in November was centered in revolving credit, reflecting tightening credit standards along with consumer paydowns and defaults. Nonrevolving credit fell $3.8 billion. Looking ahead, nonrevolving credit may rebound in December given the month’s very strong car sales. But revolving credit likely will continue its downtrend.

Consumer credit Consensus Forecast for December 09: -$8.4 billion

Range: -$10.0 billion to -$7.0 billion

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