What will drive the markets this week?
U.S. markets have risen to their pre-COVID-19 heights, despite a slumped economy, double-digit unemployment, and rising unemployment claims. The economic and earnings calendar this week is fairly light, but here are some events that will drive the market this week.
- Monday: Apple Stock Split; Palo Alto Earnings
- Tuesday: Conference Board Consumer Confidence Index; Case-Shiller Home Price Index for Jun; U.S. New Homes Sales report; & German Q2 GDP
- Wednesday: U.S. Core Durable Goods Orders (for July);
- Thursday: U.S. Preliminary Q2 GDP; Initial Jobless Claims; Pending Home Sales Index for Jul; & the Jackson Hole Symposium;
- Friday: Tesla Stock Split; U.S Personal Income & Spending for Jul; U.S Personal Consumption Expenditures for Jul; University of Michigan Consumer Sentiment for Aug; Canadian Q2 GDP; Brazilian Unemployment Rate; & French Preliminary Q2 GDP.
Monday, August 24
- Apple Stock Split: Apple recently announced a stock split. The split takes effect on August 31 for shareholders on record on Aug. 24. If you own shares of AAPL before market open on Aug. 31 you will own four shares for each share you hold, and the stock price will be reduced to one-fourth of its value at the start of trading on Aug.
- Palo Alto Earnings: Palo Alto Networks stock is outperforming the market and keeping ahead of rival cybersecurity stocks like FireEye, but that trend will be tested when it announces operating results on Monday afternoon.
Tuesday, August 25
- Conference Board Consumer Confidence Index: With about 70% of the U.S. economy based on consumer spending, another major indicator of recovery is consumer sentiment. Conference Board releases its consumer confidence index this upcoming Tuesday, and the final Michigan Consumer Sentiment Index is released this upcoming Friday. -* Case-Shiller Home Price Index for Jun*: this index measures the change in the average prices of single-family, residential real estate across a broad section of 20 major cities in the US.
- New Home Sales for Jul: this report measures sales activity of newly constructed homes and other single-family dwellings and is generally considered less important than building permits since it is more of a trailing report.
- Conference Board Consumer Confidence for Aug: there are several other confidence measures, such as the University of Michigan Consumer Sentiment, and they don’t always agree. Gasoline prices and stock market performance tend to have the biggest impact on these measures.
- Others: German Gross Domestic Product (GDP) (Q2); German Ifo Business Climate Index (Aug).
Wednesday, August 26
- U.S. Core Durable Goods Orders for Jul: this is a key measure of consumer and industrial spending trends and often causes market swings if it misses estimates.
Thursday, August 27
- U.S. Preliminary GDP (Q2): Last week the stock market topped its pre-COVID-19 levels, but the overall economic recovery has been lagging, with unemployment still in the double-digit. To get a clearer picture, look out for when the U.S reports preliminary Q2 GDP numbers on Thursday. Keep in mind that preliminary numbers are often revised, often by significant margins, but they still provide a general idea of how, or if, the economy is recovering. The consensus estimate is that GDP will be upgraded to -32.5%. You’ll recall that the first (Advance) report in Q2 showed -32.9%.
- Initial Jobless Claims: for the week ending 8/15/20, claims were up 143k to 1,106k after being down 228k the prior week. The 4-week moving average now stands at 1,174k, down 79k from the prior week. With this decrease, the 4-week moving average is now 4,616k below the highest level on record (5.790M), which occurred on 4/18/20.
- Pending Home Sales Index for Jul: this report measures actual contracts signed, whereas existing sales (reported last week) measures actual closings, so this one is slightly more forward-looking. This one will usually only affect equity markets adversely if it comes in very low.
- The Jackson Hole Symposium: The big central banking get-together is occurring virtually for the first time this Thursday due to Covid-19. The theme for this year is “Navigating the Decade Ahead: Implications for Monetary Policy.” The participants are likely to focus more on the next six months.
Friday, August 28
- Tesla Stock Split: At the close of trading on Friday Tesla shareholders will receive four new shares, for each share currently owned, totaling five. Then on Aug. 31, the stock will start trading on a stock split-adjusted basis, one-fifth the Aug. 28 closing price. Please note the stock split applies to shareholders on record at the close of trading on August 21, though split occurs to everyone owning Tesla shares before August 28, strictly speaking.
- Personal Income & Spending for Jul: these reports use data from the monthly employment report to gauge income from wages and salaries. Personal income is also sometimes used to forecast future consumer spending.
- Personal Consumption Expenditures (Core PCE) for Jul: PCE includes durable goods and nondurable goods which are directly influenced by the retail sales reports and services. This is the Fed’s preferred inflation gauge.
- University of Michigan Consumer Sentiment for Aug: this is the Final report for Aug. At 72.8, the mid-month report was a slight uptick from 72.5 the prior month. Preliminary readings for August on the Michigan Index were down from July as expanded unemployment payouts expired at the end of July and the COVID-19 pandemic continues unabated.
- Others: Canadian GDP (Q2); Brazilian Unemployment Rate; French Preliminary GDP (Q2).