It’s All About the Economy

Even as Hurricane Irene turned out to be less damaging than initially feared, it was nevertheless quite disruptive. Many Wall Street workers may find it difficult to get back to work today, though the New York City financial district and the public transportation system has largely resumed normal operations. As such volumes will likely be even thinner than is typically the case in this seasonally low-volume period.

It may be difficult to look for trends in thinly traded markets, but there will be no shortage of consequential data this week. We will know a lot more about how the economic recovery fared in August by the end of the week. The most important of these will be Manufacturing ISM report for August on Thursday and the non-farm payroll report on Friday.

Other reports dealing with housing and consumer confidence will also be useful, but the ISM and jobs reports will give us a good sense of the economy’s momentum in August. Recent readings of the nation’s manufacturing health have been quite worrisome. Going by the weak Empire State and Philly Fed surveys, the ISM report will likely be disappointingly weak.

But the labor market should hold up better. The weekly jobless data has held up relatively well, despite the broad, soft economic readings all around us. Ahead of the Friday non-farm payroll report, we will get a preview in the ADP report on Wednesday and then the jobless claims numbers on Thursday. Favorable labor market readings this week will be very reassuring in easing the market’s recession worries.

This morning’s July Personal Income and Outlays numbers were also on the reassuring side. Growth in Personal Income was in-line with expectations, while Outlays (or spending) came in significantly better than expected.

Spending, which is the life-blood of the economy, increased at 0.8%, signficantly better than the expected 0.5% and the 0.1% drop in June. The personal savings rate dropped a bit from the prior month’s level. This is clearly a reassuring start to the third quarter. But consumers suffered a number of confidence-sapping blows in August. It will be interesting to see if the July spending momentum will hold up in August.

It is all about the economy at this stage. Positive or even less negative economic data will lessen recession fears. And anything that brings down those fears will push stocks higher.

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About Sheraz Mian 45 Articles

Affiliation: Zacks Investment Research

Sheraz Mian is the Director of Research for Zacks.com.

Visit: Zacks Investment Research

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