Three Gray Swans – Week of July 21 – 25

Although we are hitting the heaviest part of second quarter earnings season next week I am looking to economic numbers as potential market moving events.

Consumer Price Index – Monday before the open

The Producer Price Index came out this week and it is being followed by the Consumer Price Index which will be reported Monday an hour before the stock market opens. I’ve mentioned before that the Fed’s job is to try to balance inflationary pressures with full employment. Inflation has not been an issue for some time so the Fed has focused on the employment mandate. However the PPI has been coming in at the high end of the recent range and we will see on Monday if that has worked its way into higher consumer prices as well. It just doesn’t seem like inflation is putting the scare into the market that it should be, a high CPI may be the catalyst that moves inflation into the economic conversation.

Apple Earnings – Tuesday after the close

Apple (AAPL) reports their earnings after the close and this is important because it’s AAPL. For some time AAPL was practically a market unto itself, but sort of fell on hard times. AAPL shares have underperformed the overall market for a couple of years.   The company is still well over 10% of the Nasdaq-100 and a favored trading vehicle of option traders. Last quarter shares moved up over 8% after reporting earnings and the quarter before that it dropped about 8% (7.99% for the purists). The average price move (higher or lower) over the last three years has been 5.41%.

Durable Goods Orders – Friday before the open

The week finishes off with a number that can be a good gage of consumer sentiment, which is the Durable Goods Orders report. This report is an indication of consumer spending on big ticket items. These are things like refrigerators and washing machines. Basically anything you expect to last more than three years. This sort of consumer spending may be considered a little more discretionary than something like food. Since the consumer can usually live with putting off the purchase of an item that qualifies as a ‘durable good’ this report may be thought of as a pocketbook survey of how consumers feel about their economic future.

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…