Upcoming data may not help much. There is little in the coming week´s data calendar to lift markets. We are anticipating gains in Case-Shiller home prices for July and new home sales for August, but investors will likely see this as par for the course. Meanwhile, a sharp drop in durable goods orders and flat consumer spending (adjusting for higher gasoline prices) could temper expectations for growth. One bright spot could be consumer confidence readings for September, which are showing improvement. Though, with gasoline prices rising and job growth stuck in neutral, it´s hard to see how this will translate into more spending.
But Spanish bailout package could be a plus. Positive policy developments in Europe next week, should they transpire, will be greeted warmly by markets. Media reports suggest that European policymakers are working behind the scenes to engineer a Spanish bailout request that could come on Thursday.
Spain´s reluctance to ask for assistance from the stability fund has been a sticking point in efforts to bring down borrowing costs and avoid a sovereign liquidity crisis. Spain is concerned that a bailout would require strict austerity measures (on top of current budget cuts) and tough oversight. But the ECB won´t initiate Outright Monetary Transactions until Spain makes the request.
The latest scheme focuses on long-term structural reforms instead of tax increases and spending cuts and could be more palatable to the Spanish government. If it goes according to plan, the announcement would be a plus for global stock markets, the euro, and peripheral sovereign bond prices. It would likely be a negative for the US dollar and Treasuries, meaning interest rates could move higher next week.
Tuesday, September 25 ? S&P/Case-Shiller Home Price Index (Jul.)
The Case/Shiller Home Price index is expected to have risen 0.8% month-on-month in July. This would translate into a 0.9% year-on-year gain, the second in a row, and a signal that home prices have turned the corner.
Tuesday, September 25 ? Consumer Confidence (Sep.)
The Conference Board´s Consumer Confidence Index should bounce back to 66.0 in September from 60.6 in August.
Wednesday, September 26 ? New Home Sales (Aug.)
New home sales likely increased 2.2% in August to 380,000. Several housing market indicators point to improvement in that segment of the market.
Thursday, September 27 ? Gross Domestic Product (Q2, Third Estimate)
We expect no revision to the 1.7 percent GDP growth rate for the second quarter. Third-quarter growth is likely to be similarly modest; our current projection is 1.5 percent.
Thursday, September 27 ? Durable Goods Orders (Aug.)
Headline durable goods orders will look ugly as aircraft orders crash. Almost everything else should be lackluster, save for the mid-month rebound in turbine machinery. Motor vehicles should fall after July´s temporary gains. Core capital goods orders should show a tepid rebound after two weak months.
Friday, September 28 ? Personal Income and Consumption (Aug.)
Spending growth was likely a strong 0.4% in August, but largely due to higher gasoline prices. Adjusting for inflation, consumer spending was likely flat. Core inflation is expected to be 0.1%, pulling down the year-over-year rate from just over 1.6% to just under it.
Friday, September 28 ? Reuters/University of Michigan Consumer Sentiment Index (September, final)
The Reuters/University of Michigan Consumer Sentiment index should hold onto the surprising gains it made mid-month.
