There's a new sheriff in town! This holiday shortened week will be dominated by the entrance of one Barack Obama, the 44th President of the United States of America. His inauguration, one day after the nation honors one of its greatest African-American shining stars, Martin Luther King Jr., is simply uncanny. Talk about dreams realized, so many are wrapped up in one today...
While the week itself is a short one that is light on economic data, the popular press will flood the wires just the same. Media will speculate about the possibilities and limitations on our new leader. There will be high hopes for the future and sober concern for the present. Almost immediately, President Obama's stimulus plan will take center stage.
U.S. markets were closed on Monday for Martin Luther King, Jr. Day. We honored his memory here by highlighting his famous "I Have a Dream" speech. Overseas, discussions at the Arab Economic Summit in Kuwait were distracted by events in Gaza, though Israel has vowed to be out before Obama is sworn in. In Paris, post last week's rate cut, ECB President Trichet gave a keynote speech.
Martin Luther King, Jr.'s dream is realized on Tuesday. That is clear to me, because I don't believe there could be a greater testament to the equality of the races within the United States once the 44th president is sworn in. Barack Obama will be the first American of African descent to lead our nation, and the day's events should be quite memorable. It'll be near impossible to tear me away from the TV set anyway.
The State Street Investor Confidence Index is due for release at 10:00 a.m. State Street (NYSE: STT), looks at the composition of investment portfolios in order to assess risk taking. The measurement is taken from the Wednesday before the report's release, so it is current. We might have anticipated that investors would be moving into risk to start the year, especially out of government bonds and into corporate debt. However, given all the sour news sprouting up on Main Street since about January 3rd, risk aversion remains prevalent for now.
The Bank of Canada has a monetary policy meeting scheduled for Tuesday, and it is expected to cut rates by 50 basis points. Fifty seems to be the standard these days, given the actions of the BOE and ECB. Looks like we set the standard destination though... zero. The rest of the world's central banks are quickly approaching it.
China is scheduled to report on fourth quarter GDP growth on Tuesday. Barron's notes the economic expansion rate may slip to 7%, marking the nation's slowest annual pace of growth in nine years.
Randall Kroszner resigns from the Federal Reserve Board of Governors, but Tim Geithner might not be leaving just yet, given his recent tax disclosure. A similar tax issue kept at least one recent appointee from taking his seat at Homeland Security, so why would Geithner get a pass to the Treasury? That will be the question of the day, as he faces hearings before the Senate Finance Committee. After all, he's replacing a guy, in Hank Paulson, who has been scrutinized for Wall Street loyalties and straying from his word. So, you can expect Congress, which is still bearing its TARP scar, will be especially mindful of who replaces Hank.
The ICSC-Goldman Weekly Same-Store Sales Report will be published on Wednesday this week due to the holiday. Sales fell dramatically last week, down 2.2% year-to-year. It was the first full week absent holiday shopping stimulant, and we expect more of the same shopping softness this week. The Mortgage Bankers Association's Purchase Applications Index might be reported on Thursday this week instead of Wednesday. Check back in here later in the week for a more solid schedule as we insure the date. Mortgage activity has benefited for the most part from long-rate contraction, but housing starts have remained scarce nonetheless.
Alternative energy looks to benefit from the Obama plan, and a group of solar energy folks are set to meet just in time in Las Vegas on Wednesday. At 1:00 p.m., look for the National Association of Home Builders to report its Housing Market Index. In December, the index stuck at the record low set in November, a reading of just 9. Overseas, the Bank of England will release the minutes of its January meeting.
December's Housing Starts will be reported bright and early at 8:30. Bloomberg's consensus of economists forecasts an annual pace of 615,000 units, compared to 625,000 reported in November. Last month's reading sat 47% lower than the November 2007 check. Hope springs eternal for a seasonal uptick once the flowers sprout and mortgage rates dig in even deeper. Here's to hoping anyway...
Weekly Initial Jobless Claims bounced right back up above 500K in the first post holiday reading last week. Bloomberg's group of economists is looking for it to spike much higher this week, to 610K, from 524K last week. We have to agree. Post Christmas, warm hearts are freezing over and retailers are reporting trouble. Americans are saving again (read stuffing money under mattresses), banks are hoarding cash and businesses are starving. Thus, unemployment is still rising. But, never fear, here comes Obama and his huge fiscal stimulus plan.
The EIA Petroleum Status Report noted increased crude oil inventory last week (+1.2 million barrels), as demand declines faster than OPEC's so-called production cuts. One has to wonder how closely the consortium, which is notorious for cheating, is keeping to its quotas. Without draws from inventory, or war with Iran, we can't see oil stopping its slide lower yet. However, it should not be long now for both... Meanwhile, the Green Power Conferences offers a discussion on carbon markets in New York on Thursday.
Overseas, look for the Bank of Japan to set monetary policy as it closes out its regular meeting. The BOJ doesn't have much room to work with though.