Markets will be closed on Thursday as America celebrates Thanksgiving Day.
However, the shortened week will be stacked with economic data. We’ll get key readings on consumer confidence and housing. The latest durable goods report and the revised GDP estimate may help give us a clearer picture of the health of the economy.
Meanwhile, the US stock market continues to set new record highs.
Here’s your Monday Scouting Report:
Here Comes 2015: There’s still over a month left in 2014. But Wall Street’s research departments have already begun releasing their outlooks for 2015.
On Wednesday, Goldman Sachs’ David Mericle published forecasts going through 2018. He see 3% GDP growth in 2015, 2.9% growth in 2016, and 2.7% growth in 2017.
From his note: “We expect the US economy to grow at a solidly above-trend rate through 2017, slowing towards trend thereafter. On the demand side, the basic reason for near-term optimism is that our financial balances model indicates that the continued easing in financial conditions should provide a positive growth impulse from the private sector, while the growth impulse from the public sector should be neutral. On the supply side, we still see considerable labour market slack. We continue to expect the first hike of the funds rate in September 2015. While the pace of hikes is likely to be gradual at first, we expect it to accelerate after 2016. By end-2018, we expect the funds rate to reach 3.75-4%, above current market pricing.”
- Markit US Services PMI (Mon): Economists estimate this services industry index climbed to 57.3 in November from 57.1 in October.
- Dallas Fed Manufacturing Activity (Mon): Economists estimate this regional activity index slipped to 9.0 in November from 10.5 in October.
- GDP (Tues): Economists estimate Q3 GDP growth will be revised down to 3.3% from an earlier estimate of 3.5%. Personal consumption is expected to be revised up to 1.9%. “September data suggest that consumption, residential investment, and equipment and intellectual property investment were stronger than assumed by the BEA in the advance estimate, while net trade and nonresidential structures investment were weaker,” Barclays economists said.
- S&P/Case-Shiller House Prices Index (Tues): Economists estimate home prices climbed 0.20% month-over-month in September or 4.6% year-over-year. “Other measures of home prices have risen in September, in line with our view that the underlying trend remains one of modest gradual improvement in the housing market,” Barclays economists said.
- Consumer Confidence (Tues): Economists estimate the Conference Board’s index of sentiment climbed to 96.0 in November. “The Conference Board index hit a seven-year high of 94.5 in October,” Credit Suisse economists noted. “We estimate that the upward momentum continued in November, given the stock market’s near record highs and significant further declines in gasoline prices.”
- Richmond Fed Manufacturing Index (Tues): Economists estimate this regional activity index fell to 15 in November from 20 in October.
- Durable Goods Orders (Wed): Economists estimate durable goods orders dropped 0.6% in October. Nondefense capital goods orders excluding aircraft, or core capex, is estimated to have increased by 0.5%. “July’s 300%+ spike in aircraft orders is still in the process of unwinding, which should keep headline orders relatively subdued,” Credit Suisse economists said. “Although short-run momentum has been sluggish, year-on-year trends in the key core aggregates have been decent”
- Initial Jobless Claims (Wed): Economists estimate the pace of weekly claims climbed to 288,000 from 291,000 a week ago. “Initial claims have been below the 300k threshold for 11 consecutive weeks, a sign that involuntary separations have reached their nadir,” Nomura economists said.
- Personal Income And Spending (Wed): Economists estimate income increased by 0.4% while spending climbed by 0.3%. “A solid rebound in core retail sales and strong consumer confidence should have driven spending to accelerate after last month’s disappointment, although flat vehicle sales and a decline in utilities spending likely provided some offset,” BNP Paribas economists said. “Meanwhile, solid gains in hours worked and earnings are expected to have lifted personal income in October.”
- Chicago Purchasing Manager (Wed): Economists estimate this PMI slipped to 63.0 in November from 66.2 in October. “Last month, the index reached the highest level since October 2013, so we expect some slowing from robust levels,” Bank of America Merrill Lynch economists said. “That said, we think business activity in Chicago will remain strong and trend close to its 6-month moving average of 62.0. One potential downside risk has been the cold weather, as temperatures hit a record daily-low in the middle of the month. Temperatures in November this year are projected to be lower on average than they were in November 2013.”
- Univ. Of Michigan Confidence (Wed): Economists estimate this index of sentiment improved to 90.0 from the 86.9 in October. “Gasoline prices have continued to tumble since the preliminary survey window, while equity prices have moved higher,” Barclays economists said. “A reading of 90.0 would represent the highest levels of consumer sentiment since July 2007.”
- Pending Home Sales (Wed): Economists estimate the pace of sales climbed 0.7% in October. “This index has increased in five of the past seven releases, as the market for previously owned homes appears to have escaped the doldrums,” Nomura economists said. “For the longer trend, we expect to see a gradual pace of improvement that will not necessarily follow a straight line”
- New Home Sales (Wed): Economist estimate the pace of sales increased 0.9% to an annualized rate of 471,000 in October. “New home sales exceeded 460k in August and September after subpar performance for most of the year,” Nomura economists said. “The increase in building permits in October provide support for sales, but the decline in mortgage applications for purchases and less optimistic homebuilder sentiment in October put some downside risk on sales.”
- Markets will be closed Thursday in observance of Thanksgiving Day.
Goldman Sachs David Kostin sees modest gains in the stock market for the next few years. “We forecast US stocks will deliver a modest total return of 5% in 2015, in line with profit growth.The US economy will expand at a brisk pace. Corporations will boost sales and keep margins elevated allowing managements to both invest for growth and return cash to shareholders via buybacks and dividends. Investors will cheer these positive fundamental developments.”
GMO’s Jeremy Grantham thinks stock surge before crashing. “”My personal fond hope and expectation is still for a market that runs deep into bubble territory (which starts… at 2250 on the S&P 500 on our data) before crashing as it always does.”
For more insight about the middle market, visit mid-marketpulse.com.