The schedule of economic releases for the week of August 26th is as follows:
- Monday: Durable Goods Orders and Dallas Fed Manufacturing Survey
- Tuesday: S&P Case-Shiller HPI, Consumer Confidence, 2-Yr Note Auction, and John Williams speaks
- Wednesday: Pending Home Sales Index, MBA Purchase Applications, and 5-Yr Note Auction
- Thursday: GDP, Jobless Claims, 7-Yr Note Auction, Fed Balance Sheet, Jeffrey Lacker, and James Bullard speaks
- Friday: Personal Income and Outlays, Chicago PMI, Consumer Sentiment, and James Bullard speaks
I spoke with Peter Costa, Trader and President of Empire Executions, and CNBC Market Commentator, about the overall market, debt ceiling vote, Dallas Federal Reserve (“Fed”) manufacturing survey, Richmond Fed manufacturing index, Chicago PMI, and housing data.
Costa is not expecting anything noteworthy from the equity markets this week. According to Costa, this recent mini pull back is reasonably healthy for the equity markets and he would like to see another 5% to 8% correction, which could build for a strong rally towards the end of the year. This adjustment in stocks is good because it stabilizes the debt level and 3rd quarter earnings are looking good. The retraction in equities is not because of Fed fears. It is a natural progression in a bull market where any kind of negative news will move the market downwards, especially in late August when there is low volume and light trading. Interest rates are on the rise as a result of an expanding economy-not because of stimulus talk. Costa is starting to see value in some spotty equities in Europe as opportunities to invest, while the region struggles to emerge from the decade long recession and emerging markets remain uneasy reacting to Fed tapering talk.
Debt Ceiling Vote
Although there is no set date for the debt ceiling vote in Washington, there is some fear that it has been baked into the market already. Costa feels that despite Fed fears and a nasty fight in Congress this fall over increasing the debt ceiling, which could dampen equities, better managed companies will overshadow the potential downturn.
Macro Data
Next week there are a few pieces of regional Fed data on the slate, including the Dallas Fed manufacturing survey, Richmond Fed manufacturing index, and Chicago PMI. Lately, some traders feel the macro data has been showing signs of bottoming out. Costa feels this is a buying opportunity as he is a long term investor and remains positive on equities. Costa's opinion is that anytime the market drops 200 to 300 points it is an opportunity to step in and purchase stocks.
Housing Data
From the housing sector, investors will get S&P Case-Shiller HPI, pending home sales, and MBA purchase application data this week. Costa believes the larger areas such as Las Vegas, Phoenix, Denver, and South Florida are starting to gain momentum, while prices in the stronger areas like New York continues to rise higher. South Florida for example, is as hot as it was during the hosing bubble.
Fed Speakers on the Circuit
There are a few Fed officials on the speaking circuit next week; among them are John Williams, Jeffrey Lacker, and James Bullard. Costa thinks Jeffrey Lacker is the most influential Fed speaker next week and Fed watchers will be listening to what he has to say. Lacker could be next in line to become Fed Chief after Vice Chairwoman, Janet Yellen and former Obama Economic Advisor, Larry Summers. Costa thinks the speakers are trying to soften the blow to financial markets of the central banks plans to taper its stimulus program.
