Stocks will likely not do much in today’s trading session given the absence of anything meaningful on the economic calendar. But we do have a host of economic reports on deck for the rest of this week that will likely further confirm the improving outlines of the domestic economic outlook.
Investors will be keenly evaluating the odds of further quantitative easing from the Fed through Tuesday’s FOMC announcement. The overall trading action this week will largely reflect investors’ desire for more Fed help in each economic release.
The Fed’s dual mandate is about jobs and price stability. We got a favorable reading on the jobs picture last Friday and will get feel for the inflation picture with Thursday’s PPI and Friday’s CPI readings. The Fed’s preferred inflation measure of the ‘core’ CPI that excludes the contribution of food and energy components should remain largely benign.
But the ‘headline’ CPI reading will likely be a bit hot, given the recent uptrend in fuel prices. This week’s manufacturing readings are expected to show continued resilience in this key sector of the nation’s economy. We will get the February Industrial Production report on Friday and the March Philly Fed and Empire State manufacturing surveys on Thursday. Most importantly, we will get some measure of consumer spending trends through the Retail Sales report on Tuesday morning.
The outlook for the U.S. economy is fairly positive, with growth in the first quarter expected to be in the 2% vicinity. The expectation is for growth to modestly accelerate from that level in the following quarters. Continued labor market resilience and stabilization of housing could cause upside surprises to this outlook, while high gasoline prices have the potential to blunt the growth momentum.