Will Next Week’s Big Economic Data Releases Be Impacted by the Government Shutdown?

Data Release image4/08/11: In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on the financial markets today.

The Nitty Gritty Details:
Relief that Thursday’s strong aftershock in Japan did not inflict major damage and gains in resource stocks are lifting the major averages slightly this morning.  Domestically, the market’s focus today will be on the potential disruption from a government shutdown as Congress works furiously to reach a deal.  Meanwhile, there is a lull of economic data today before a busy week of data and the start of earnings season next week.  Overseas markets are broadly higher, as European markets are successfully digesting the rate hike and Portugal’s rescue.

Looking back at Thursday, after bouncing around the neutral line most of the day, stocks sold off after the news that a 7.1 magnitude earthquake hit Japan.  Thankfully, reports indicated the country’s nuclear facilities sustained no further damage.  Market participants took $110 oil, Portugal’s aid request and the ECB rate hike in stride, as sentiment got a boost from better-than-expected March sales from retailers and lower jobless claims.  Only three sectors finished in the green (Energy, Consumer Staples and Technology), while no sector lost more than a half percent.  Crude jumped over a dollar to $110 while copper rallied on supply concerns.  Most other key commodities were lower but crude’s strength was enough for the CRB Commodity Index to produce its sixth straight gain.

The Markets and You Broken Down:

Around our financial planning firm this morning, we were discussing three items that we thought would be of particular interest to our readers:

Assuming the government is open next week, there is plenty of economic data for markets to digest. Data for April (Empire State manufacturing index), March (CPI, PPI, industrial production, capacity utilization and retail sales) is due out next week, along with February’s merchandise trade data.  In addition, the weekly data on jobless claims, retail sales and mortgage applications and the Fed’s Beige Book is on the docket.  However, if the government shuts down (and the shutdown lasts into next week), most of the data mentioned above would not be released.  Because the Fed would stay open in a government shutdown, the IP, capacity utilization, Empire State (and importantly) the Beige Book data would still be released as scheduled.

Europe’s central bank became the first monetary authority in a major developed economy to raise interest rates since the global financial crisis struck, a sign that an era of cheap credit is coming to a close. In the United States, where there is less inflation angst than Europe, the Federal Reserve is unlikely to follow until very late this year or early next year.  Moving ahead of the Fed is unusual for Europe’s central bank.  The Fed moved first in the previous two global monetary-tightening cycles since the ECB was formed 12 years ago (in the late 1990s and in the mid-2000s).

Federal securities regulators are moving toward easing decades-old constraints on share issues by private companies in a sweeping review that could remake the way American start-ups raise capital. The review by the Securities and Exchange Commission, disclosed in a letter to a lawmaker, could fuel the fast-growing market in private shares of technology firms such as Facebook and Twitter.  The steps under consideration would help such privately held companies raise more money without incurring the increased reporting and other requirements of becoming a public company.  Some of the changes would include raising from 499 the number of shareholders private companies can have without being required to open their books and making it easier for such companies to publicize share offerings.

As always, email me here with your questions or comments.  I love to hear from you and thoroughly enjoy the “intellectual debate” with our clients and friends that these opinions generate.

Greg Powell, CIMA
Wealth Consultant

Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.

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