Three Gray Swans – Week of August 4 – 8

Last week was a fun week where there could easily have been more than three things to focus on. I also love that with FOMC and an Employment Number dominating the expectations for the week, the day between those two results was the day the S&P 500 had a headline grabbing drop. This week is expected to be a little less eventful than last week, but you never know. Now it is time to look forward –

Tuesday – Shortly After the Stock Market Opens – ISM Non-Manufacturing Index

This is an indication of the health of the non-manufacturing component of the US economy. We are much more of a service economy so this number gets a lot of love as far as an indicator of economic growth. Anytime the number is over 50, this is considered an indication of economic growth. Too far away from 50 (on the upside) and it could mean the economy is starting to grow too fast. The June number that came out on July 3rd was 56.0. Expectations are for a slightly higher number this time around (like 56.3 to 56.5 depending on who you listen to).

Thursday – While We are Sleeping – ECB and Bank of England Interest Rate Decisions

Just like the FOMC, the question will be more about tone than these rate decisions. So far I have been avoiding foreign news in this blog space, but the rate decisions may have us asking, “what happened?”, as we wake up and turn on our favorite business network Thursday morning.

Friday – Before the Open – Unit Labor Costs

I’m going to keep watching for any inkling of inflationary pressures and rising labor costs can result in higher prices across the board. The economic calendar is fairly unexciting next week, especially compared to last week, so this may potentially be the best volatility inducing number next week. This is a quarterly number which came in at 5.7% when all was said and done for the first quarter of 2014. It is also a choppy number so the assumption (and consensus estimate) is for 2.0%. A high number may confirm the previous quarter’s result and that labor costs are truly something that market should be keeping an eye on.

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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…

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