WHAT’S ON TAP?

For the week of July 12th (in conjunction with Econoday):

Earnings will take front stage this week as the Q2 season officially begins.  Let’s take a look at what’s on tap:

Monday – Alcoa (AA) officially kicks off the earnings season after the bell.

Tuesday – Intel (INTC) reports after the bell.

ICSC-Goldman Store Sales 7:45 AM ET

International Trade 8:30 AM ET

The U.S. international trade gap widened to $40.3 billion in April from $40.0 billion the previous month.  For the latest month, exports slipped 0.7 percent while imports decreased 0.4 percent.  By end-use categories, goods exports’ weakness was led by a decline in consumer goods while   softness in goods imports was in the same category.  However, the bright spot in imports was a jump in capital goods excluding autos. Businesses appear to see demand strong enough to expand or upgrade capacity.  Looking ahead, the question is whether businesses in the U.S. and abroad see consumer demand and investment strengthening or slowing.  Leading into May, concern over European sovereign debt problems remained high while the U.S. consumer still looked relatively healthy ahead of May retail sales.  Monthly data are volatile but this suggests imports may be relatively strong compared to exports for May.

International trade balance Consensus Forecast for May 10: -$39.0 billion

Redbook 8:55 AM ET

Treasury Budget 2:00 PM ET

The U.S. Treasury monthly budget report showed a deficit of $135.9 billion for May.  But the pace slowed for the year-to-date deficit for the fiscal year beginning in October. The cumulative deficit came in at $935.6 billion, a sizable sum but 5.7 percent lower than for May last year.   Looking ahead, the month of June typically shows a modest surplus for the month. Over the past 10 years, the average surplus for the month of June has been $16.7 billion and $1.9 billion over the past 5 years.  The June 2009 figure, however, was a huge deficit of $94.3 billion.

Treasury Statement Consensus Forecast for June 10: -$70.0 billion

Wednesday –

MBA Purchase Applications 7:00 AM ET

Retail Sales 8:30 AM ET

Retail sales disappointed in May, falling 1.2 percent. But the decline had followed healthy gains of 0.6 percent in April and 2.1 percent in March.  Sales ex-autos decreased 1.1 percent in May after advancing 0.6 percent in April.  The volatility appears to have been related to swings in housing sales from the ending of special tax credits.  The drop in overall sales in May was centered in a 9.3 percent plunge in building materials.  However, this component jumped 8.1 percent in March and 8.4 percent in April.  So, we are likely to see some leveling off in retail sales ex autos in June.  But a 4.7 percent drop in unit new motor vehicle in June sales points to a drop in the headline sales number.

Retail sales Consensus Forecast for June 10: -0.2 percent

Retail sales excluding motor vehicles Consensus Forecast for June 10: 0.0 percent

Import and Export Prices 8:30 AM ET

Business Inventories 10:00 AM ET

Business inventories rose 0.4 percent in April, continuing a run of gains.  April, however, represents a slowing from 0.7 percent in March and 0.5 percent in February. Stocking decelerated the most among retailers as businesses appear to become concerned about growth in demand easing.  Looking ahead, we already have a 0.4 percent decline in manufacturers’ inventories for May and a 0.5 percent boost for wholesaler inventories, basically a wash for the two.  Overall inventories will be led by the retail component when it comes in and it likely will be up based on weak retail sales for the month.

Business inventories Consensus Forecast for May 10: +0.2 percent

EIA Petroleum Status Report 10:30 AM ET

FOMC Minutes 2:00 PM ET

The Minutes of the June 22-23 FOMC meeting are scheduled for release at 2:00 p.m. ET.  Since Fed officials have made it clear that short-term interest rates are on hold for an extended period, the focus likely will be on commentary on strengths and weaknesses of the economy plus any insight into sovereign debt problems in Europe.

Thursday – JP Morgan (JPM) kicks of bank earnings.  Google (GOOG) reports after the bell.

Producer Price Index 8:30 AM ET

The producer price index in May fell 0.3 percent after dipping 0.1 percent in April.  But at the core level, the PPI gained 0.2 percent, matching the rate in April.  The decline in the headline PPI was led by a 1.5 percent drop in energy costs, following a 0.8 percent dip in April.  Also adding to weakness in the headline number was a 0.6 percent decrease in food prices after a 0.2 percent decline in April.  The mild acceleration in May for the core PPI was led by a spike in tobacco prices and a boost in light truck prices.  Energy again will likely weigh on the June PPI.

PPI Consensus Forecast for June 10: -0.1 percent

PPI ex food & energy Consensus Forecast for June 10: +0.1 percent

Empire State Mfg Survey 8:30 AM ET

The Empire State manufacturing index for June firmed to 19.57 from 19.11 the month before.  Empire’s strength was broad based.  New orders rose more than three points to 17.53. Shipments, which follow orders, rose nearly 8-1/2 points to 19.67 with the workweek rising to 8.64 versus no change in May.  Based on the new orders index, the overall index is likely to be healthy in July.

Empire State Manufacturing Survey Consensus Forecast for July 10: 18.0

Jobless Claims 8:30 AM ET

Initial jobless claims fell 21,000 in the July 3 week to 454,000 for the lowest level since early May. The four-week average fell 1,250 to 466,000, the best weekly improvement since early May though the level is still slightly higher than a month ago.  Declines were also seen for continuing claims, down 224,000 in the June 26 week to 4.413 million for the lowest level since November. Markets will be hoping for another dip in initial claims for the latest week but the fact that it is for a holiday shortened week will raise doubts about its reliability.

Jobless Claims Consensus Forecast for 7/10/10: 445,000

Industrial Production 9:15 AM ET

Industrial production in May surged 1.2 percent, following a 0.7 percent boost the month before.  Manufacturing has been robust over the last three months with this component gaining 0.9 percent in the two latest months and jumping 1.2 percent in March.  A jump in motor vehicle production added significantly to May’s overall production boost.  Overall capacity utilization continues its upward trend, reaching the 74.7 percent mark in May from 73.7 percent the prior month.   Looking ahead, we are likely to see some retracing in production in June.  Production worker hours for the month dropped 1.0 percent.  However, manufacturing surveys were not as pessimistic as the ISM manufacturing index and Philly Fed index slowed but remained in positive territory.  The New York Fed index actually edged higher into positive territory.  The need to rebuild auto inventories could support June’s production figure.  Some automakers have deferred retooling to restock.

Industrial production Consensus Forecast for June 10: -0.2 percent

Capacity utilization Consensus Forecast for June 10: 74.0 percent

Philadelphia Fed Survey 10:00 AM ET

The general business conditions index of the Philadelphia Fed’s Business Outlook Survey saw a slowing in growth in June as the headline index, called general business conditions, edged back 8.0 from a long string of 20 or nearly 20 readings. Looking ahead, however, we may see a modest rebound.  The new orders index accelerated to 9.0 from 6.1 in May.

Philadelphia Fed survey Consensus Forecast for July 10: 12.0

EIA Natural Gas Report 10:30 AM ET

Friday –Bank of America (BAC), GE, and Citigroup all report earnings.

Consumer Price Index 8:30 AM ET

The consumer price index has been negative two months in a row—thanks to energy declines.  In May, overall CPI inflation declined 0.2 percent, following a 0.1 percent dip in April. Excluding food and energy, CPI inflation rose 0.1 percent, following no change in both March and April.  Helping to keep the core rate soft was no change in the owners’ equivalent rent subcomponents.  This series has either been flat or negative for several months.  Looking ahead, seasonally soft gasoline prices should kept the headline number on its recent downtrend.

CPI Consensus Forecast for June 10: -0.1 percent

CPI ex food & energy Consensus Forecast for June 10: +0.1 percent

Treasury International Capital 9:00 AM ET

Consumer Sentiment 9:55 AM ET

The Reuter’s/University of Michigan’s Consumer sentiment index rose to 76.0 for the final June reading, up from 75.5 at mid-June and from 73.6 May and 72.2 in April. Sentiment hit a recent low in mid-April of 69.5.  The latest gain in sentiment was led by the current conditions component as the expectations component edged back.  Looking ahead, the mid-July reading overall could be lifted by further gains in the stock market and a recent dip in initial jobless claims.  But market expectations should still be modest given that unemployment remains high and hiring sluggish.

Consumer sentiment Consensus Forecast for preliminary July 10: 75.0