Here, then, in looking at the subject is the first of what should be several posts on the subject.  It looks at the current income tax structure and what it would revert to if the so-called Bush tax cuts* are allowed to expire.  While this is not particularly heavy lifting, I am using information from The Tax Foundation (www.taxfoundation.org).  I have no idea which way this group leans, but it looks pretty non-partisan.

Presently, there are six income tax brackets.  They’re marginal income tax brackets in that they represent the tax paid on the next dollar of income.  Here are the brackets:

1. 10%
2. 15%
3. 25%
4. 28%
5. 33%
6. 35%

If the Bush tax cuts are allowed to expire the new tax brackets will look like this:

1. 15% (10% bracket is eliminated)
2. 28% (formerly 25%)
3. 31% (formerly 28%)
4. 36% (formerly 33%)
5. 39.6% (formerly 35%) – this is apparently the only verbatim reversion the White House is clear on.

The long-term capital gains tax rate would go from 15% to 20%.

The tax rate on qualified dividends would rise from 15% to ordinary income tax rates.

*  According to Miller Tabak, the Bush tax cuts are generally considered to be those from two separate acts, the Economic Growth and Tax Relief Reconcilation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003.  There are 69 separate provisions that are set to expire.  You can see the entire list here.

Recent posts

• FDIC Insurance Coverage
• Bernanke talks, market tanks
• Debt Overhang:  Economics 101 in Magic Marker
• Popping water balloon
• __flation Update

Below

• Rally to resistance
• Earnings
• European bank stress tests
• Deteriorating housing data

Capital markets Recap (as of 3:20)

I’ve included, below, an update of an S & P 500 chart I put up last Friday.  The dashed line at 1,100 remains resistance for stocks.  We’re going to finish the day very close to that level, although as I type at 3:38 I wouldn’t be surprised to see us finish slightly below 1,100.  This week’s action was constructive in that we spent several days with give-and-take between last Friday’s range before making a run at 1,100.  Like a hammer hitting the same spot on a piece of wood, the resistance will eventually give way.  The pessimism around stocks is high enough that next week could be that week, but I wouldn’t bet lunch money on it.

Top stories

Earnings are ostensibly the biggest news stories of the week.  This week saw 126 of the S & P 500 (technically 497) report earnings.  84.9% reported positive earnings surprises; 18 reported earnings disappointments.  In all, 149 companies (30%) have reported.  84.5% of the reports have been [positive] earnings surprises; 14.8% have been earnings disappointments; 1 company met estimates exactly.  All sectors but Telecom reported year-over-year earnings growth.  The best performance has come from the Consumer Discretionary sector (+210%), followed by Financials (+197%) and Materials (+100%).

I am running out time as I work from bottom to top of this dispatch, but here’s a thumbnail of some high-profile earnings releases.

• Ford – $2.6 billion profit
• McDonald’s – good profits on frozen drink sales
• Microsoft – biggest increase in sales in two years
• Amazon – missed estimates.  Stock opened up $15.07 lower but managed to close the gap to -$2.88
• American Express – good results
• Financials – most look good on an improved credit environment
• Apple – satisfied Wall Street with a stand out quarter
• IBM – missed estimates

For the next quarter expectations are highest for Financials (+53.24%), Industrials (+42.5%), Materials (+41.2%).  They’re lowest for Telecom (-0.47%), Utilities (+3.9%), Consumer Staples (+6.1%), and Health Care (+6.2%). 

In the next week 164 companies will report earnings, with the largest being from the Industrials (26) and Finance (25) sectors.  After that, things begin to tail off.

What has obscured earnings data over the past week have been–in my opinion, at least–two things:  Chairman Bernanke’s testimony to Congress and the stress tests at the major European banks.  With the former, before he had testified, there had been some speculation that the Fed might stop paying interest on bank reserves held with it.  That would be a stimulative measure intended to send banks looking for higher returns amongst, where else, making loans.  Unfortunately, while the Chairman spun a tale of woe about the economy he spent very little time talking about specific steps the Fed could/would take.  Click here for the market’s response.

With regard to the latter, there was apparently a leak yesterday that the stress test results  had come back to show a healthy patient.  In fact, after the market had closed it came out that the stress tests were going to be relatively stress free.  Essentially, the stress tests were to have subjected the European banks to stimulated disastrous conditions–much like the U.S. did with its banks early last year.  The U.S. tests were so arduous that they considered a worst case scenario of–yikes!–10% unemployment.  What the European stress tests did, however, was only look at the banks’ portfolios of tradeable securities and not those held to maturity.  And why not?  If the securities are held to maturity one gets the face value back, unless you happen to hold the next Lehman Brothers or General Motors bond.  What that produced was a list of mostly “healthy” banks (quotation marks were necessary) with a couple of sacrificial-lamb banks that are already on life support.  In contrast to the $30-40 billion estimate of capital needed, the result was a paltry $3.3 billion.  According to Miller Tabak, Greece alone was anticipated, in private estimates, to need $10 billion itself.  In short, the European stress tests were a sham and should leave markets with little confidence in the European banking system.  In fact, equity index futures were off by a fair amount this morning once the initial news hit.

Bill Miller, the famed manager of Legg Mason’s Value Trust fund, said this week that,

U.S. large capitalization stocks represent a once in a lifetime opportunity, in my opinion, to buy the best quality companies in the world at bargain prices.  The last time they were this cheap relative to bonds was 1951.  I was one-year old then, but did not have sufficient sentience or capital to invest.”

This week

Week’s data was focused on housing, which continues to deteriorate.

Most of the data this week was focused on housing.  Here’s a quick summary of the releases.  I’ve colored the consensus estimate and the prior release:  green if better than; red if worse than.

• NAHB Housing Market Index (i.e. builder sentiment) – 14 (expected 16; prior 17)
• Housing Starts – 549,000 (expected 577M; prior 593M)
• Building Permits – 586,000 (expected 575M; prior 574M)
• House Price Index – 0.5% (expected -0.3%; prior 0.8%)
• Existing Home Sales – 5.37 mil (expected 5.10 mil.; prior 5.66 mil.)

That’s four greens and six reds.  It’s a pretty simplistic way of viewing the data, but with four of five red in the prior category we can say that the data have deteriorated over the past month or so.  Three of five in the expected category are green, suggesting that the data were better than the economists expected.  I’d give more weight to the first category and chalk up a deterioration in housing.

The Leading Economic Indicators (-0.2%) were significantly weaker than the prior reading (+0.5%) but better than expected (-0.3%). The so-called Co/Lag index fell by 0.1%.  It’s a ratio of the Coincident indicators compared to the Lagging indicators.  Its year-over-year level is 5.5%, and that’s the best pace since 1983, according to one of our services.

Next week

A whole slew of stuff comes next week

Key indicators to watch

• New Homes Sales (June) – Monday
• Case-Shiller Home Price Index (May) – Monday
• Federal Reserve’s Beige Book (5 of 8 released in 2010) – Wednesday
• Durable Goods Orders (June) – Wednesday
• Initial Jobless Claims (weekly) – Thursday
• Gross Domestic Product et al (Q2) – Friday
• University of Michigan Consumer Confidence (July final) – Friday – given recent deterioration and general confusion over leading nature of the survey this should be an important one to watch.

Regional surveys (all for month of July)

• Dallas Federal Reserve Manufacturing Activity – Monday
• Chicago Purchasing Managers index – Friday
• ISM – Milwaukee – Friday

Graig P. Stettner, CFA, CMT

Vice President & Portfolio Manager

Tower Private Advisors

Here’s an excerpt from FDIC chief, Sheila Bair that was included with the FDIC”s press release.

With this permanent increase of deposit insurance coverage to $250,000, depositors with CDs above $100,000 but below $250,000 will no longer have to worry about losing coverage on those CDs maturing beyond 2013. We strongly encourage all bank depositors who have questions about their insurance coverage to go to our Web site at www.fdic.gov and use our Electronic Deposit Insurance Estimator (EDIE) or call our toll-free number at 1-877-ASK-FDIC. Insured deposits provide the comfort and peace of mind to depositors that their money is 100 percent safe – provided they keep their deposit balances within the insurance limits.

Click here for the entire press release.

Another measure taken in those dark days was to offer FDIC protection, with no limit on dollar amounts, on certain types of accounts, including low- to no-interest checking accounts.  That is set to expire at the end of the year, but there is the option to extend it.  In this era of safety nets and national nanny-ness, I’d say there are decent odds of it at least being renewed.

10:17 am update, courtesy of Gary Shearer

The Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by President Barack Obama today permanently raised the maximum deposit insurance amount to $250,000. In addition, the Act made this increase retroactive to January 1, 2008.

The provision making the law retroactive means that the $250,000 deposit insurance amount applies to banks that failed between January 1 and October 3, 2008. These insured institutions are:

Hume Bank, Hume, MO

ANB Financial, N.A., Bentonville, AR

IndyMac Bank, F.S.B., Pasadena, CA

First Priority Bank, Bradenton, FL

The Columbian Bank and Trust Company, Topeka, KS

Silver State Bank, Henderson, NV

This retroactive increase has reduced the number of uninsured depositors at these failed institutions from more than 10,000 to approximately 500.

That’s 9,500 depositors with uninsured deposits who now have insured deposits.  You are forgiven for wondering if that change had anything to do with making certain voters happy.

Gold

The chart below features the breakeven inflation rate for the 10-year TIPS (Treasury Inflation Protected Securities).  TIPS are issued by the Treasury and feature a monthly inflation compensation based on the headline Consumer Price Index.  The breakeven inflation rate is determined by subtracting the yield on the TIPS from the Nominal 10-year; that is, the 10-year that is a straight coupon bond with no inflation compensation.  Presently, inflation over the next ten years, based on this measure, is expected to be 1.70% per year.  You can disagree with that–I certainly do–but if that were out of line with the consensus on inflation, market participants would step into arbitrage away the excess/deficit.  So, at any point in time it’s a marked-to-market estimate of inflation.  The TIPS is less liquid than the nominal bond so probably a few basis points of illiquidity are priced in.

For now the trend is–as Dennis Gartman might say–from upper left to lower right.  There have been a series of lower lows, lower highs, and a cross in the moving averages.  The only thing in this picture that points to an upward trend is the upward-sloping 200-day moving average.  The weight of the evidence in this daily-traded inflation gauge is almost unequivocal:  deflation is the risk over the next ten years; not inflation.

Here is a look at the same chart with the price of gold added.  Presently, gold seems to be most popular as a way of expressing a bet that fiat (by decree only) currencies are in trouble, but there is clearly a connection between gold and implied inflation.  To the extent that gold is a way to also express a bet on inflation (without inflation gold isn’t needed as a store of value and vice versa), it looks like gold has a ways to go down to catch up.

Let’s now take a look at the inflation implied in the Treasury yield curve.  As you can see from the chart below, a yield curve plots yields and maturities.  The curve is generally sloping to reflect the higher uncertainty that goes along with longer time frames.  There are several unknowns about the future as it relates to U.S. Treasuries.  There is the possibility that the U.S. might default on its obligations–very small risk–and there’s the possibility that inflation might pop up.  As a consequence, investors expect higher yields.  In the first case (default) they want compensation for the risk.  In the second case (inflation) they want some compensation that their coupon payment received in, say, five years is compensation for inflation.

Now, it’s possible to determine the compensation that investors require to invest in a 10-year over a 2-year Treasury.  (There’s also a monetary policy factor built into the curve, too, as the 2-year Treasury is considered a proxy for the Federal Funds rate.)  The next chart depicts the inflation/default premium.

The chart shows the difference in yields between the 2-year Treasury and the 30-year (top panel), the 10-year (middle panle), and the 5-year (lower panel).

All three are showing lower inflation/default premiums as each is back to 2009 levels.

My conclusion is that gold is heading lower for now.  The market’s conclusion is that inflation isn’t a worry.  The two make sense together.

Prior posts

• Yet Another Magazine Cover Story

Below

• Lousy week for the first week of earnings season.  Good earnings = stocks down
• More ammunition for double-dippers

Capital Markets Recap

(as of 2:27)

Please note the spike in Implied Volatility.  Also known as the Fear Index, what used to go by the ticker VIX (now VXO) measures the expected volatility based on option prices.  Option prices are a function of the following factors:

D – dividends

I – interest rates

V – volatility

U – underlying stock price

T – time

S – strike price (the price at which the option can be exercise)

Those initials made a great mnemonic aid in one of the CFA exams, and five of the six factors in the acronym are easily known . . . all but volatility.  From algebra you’ll recall that with just one unknown, it’s easily solved for.  While options can be used for both speculation and protection it seems that their prices move most violently when they’re bought for protection.   When put options are bought for protection their prices rise, while all of the factors remain fixed or at least known.   Therefore, what changes is their implied volatility.  It goes up.  Thus, the Fear Index.

The VIX is a contrary indicator.  As it rises it should push one closer to being bullish.

Here’s a simple technical look at the S & P 500.  With this week’s action we’ve made the third lower high (labeled LH on the chart).  Coupled with two lower lows (labeled LL on the chart), that makes for a downtrend.  The horizontal lines are previous areas where either buyers (red) or sellers (dashed white) have stepped in with enough force to overwhelm the selling or buying (circled areas).

Admittedly simple, the chart does present us with a straightforward lens through which to view the action:

• A decline that drops through1043 is likely headed to 1011.
• A decline that drops through 1011 confirms the downtrend and likely heads points us toward 900 – time to sell some stocks.
• A reversal–like this week’s–that stops short of 1011 is an alert that the trend is reversing upward.  Ideally, we would want to see some basing action above 1011, rather than a V-shaped bounce.  It’ll set us up for a bullish, inverted head-and-shoulders pattern.  If it plays out, it’ll target 1200.
• A more aggressive strategy might include making some buys with the S & P 500 around 1011 and making some sells around 1100.  In effect, taking advantage of the apparent summer range.

Top stories

If you hadn’t heard, the second quarter earnings reporting season started in earnest this week, kicked off by Alcoa.  So far just 23 of the companies in the S & P 500 have reported.  It’s been overwhelmingly positive (20 positive surprises, 3 negative) but from a really small sample.  129 of the companies will report next week.

• Alcoa’s earnings were better than expected
• Intel reported blowout earnings, its best quarter in a decade.  Analysts looked for revenues of $10.3 billion; the company reported $10.8. 
• GE reported earnings that beat estimates, helped by better results in its finance unit, but its sales came up short.
• Bank of America beat the GAAP earnings estimate but came up short on the adjusted number.  The stock is down (-)9.5% from last night’s close.
• Citigroup knocked the ball out of the park, beating the GAAP and adjusted numbers by 63% and 83%, respectively.  Stock down 5.5%.
• Goldman Sachs came to a settlement with the SEC . . . cool $500 million.  Stock up 7.3% from the announcement.
• Apple says its “working our butts off” to address the iPhone4’s antennae problem.  It might want to spend some time listening to engineers who point out these problems before they arise.  Buyers of the three million phones will get a free case that addresses the problem.

Bloomberg reported that “Consumer Confidence in U.S. Slides, Heightening Risk of Economic Slowdown.”  Sorry, folks, that should have read “Consumer Confidence in U.S. Slides, Reflecting Risk of Economic Slowdown.”  At best, consumer confidence is a coincidental–occuring at the same time–indicator, not a leading indicator.

The much-ballyhooed Financial Regulation bill passed through Congress, and the President is expected to sign it next week.  Despite at least one poll that said 4 of 5 don’t think it’ll prevent another financial crisis or protect them (what do those four know, anyway), and despite misgivings by the solons in Congress (“well, it’s not perfect, but . . . “), those faithful stewards of our nation insist it’s good enough to sign.

Ever hear of “technical correction bills?”  Neither had I, but our Strategas service had this to say this morning about them.

Financial Regulation: The Senate passed the final financial regulation bill yesterday and President Obama is expected to sign the measure next week. The details will be filled in over the next few years through regulatory rulemaking and through “technical corrections” bills that could potentially make substantive changes to key provisions. Think Reg Reform Is Done? Just Wait for the ‘Corrections’ Bill: Top lawmakers have acknowledged another bill will be needed to clean up their bill to overhaul the financial system, in which many complicated provisions were decided near the end of a marathon 20-hour session…But how far the corrections bill could go remains a question. Some said it may be confined to technical changes to better reflect congressional intent; others see an opportunity to make more substantive alterations… Even a change as simple as inserting or striking a word could have a big impact and once any corrections bill delves into making substantive changes, every interested lobbying group will be going to the mat for its issues. (American Banker, 7/16).  (Underlining is mine.)

 And this to say about Goldman Sachs:

GS/SEC Bookends: You’ll read a lot about the timing of the Goldman Sachs settlement today. We will leave the conspiracy theories to others. Goldman Settles SEC Suit for $550 Million: It’s interesting to note the timing of both the beginning and now the end of this case. Goldman was formally charged right around the time when the public was beginning to take interest in financial reform. The case made for the perfect narrative of an evil Wall Street firm that needed to be reined in with thoughtful regulation from Washington. And when did the case end? The settlement was announced a few hours after Congress passed the financial reform bill, sealing the legislation’s fate. So there’s no longer any reason to make an example of Goldman. (The Atlantic, 7/15).

So Tiger Woods’ wife gets $750 million, the SEC gets $500 million.  Is that right?  I mean right?

This week

Folks looking for evidence of a double dip in the economy–the feared second V in W–found it this week in the Empire State Manufacturing and Philly Fed indexes.  The former dropped from 19.57 to 5.08; the latter fell from 8.0 to 5.0.  Both were significantly below estimates.  As the chart below attests, however, neither index has much predictive ability–about as much as a broken clock.  Say 2:00 long enough and soon you’ll be right.

All of this is beginning to wear on the consumer.  University of Michigan Consumer Confidence fell sharply, from 76.0 to 66.5, far below economists’ expectations of 74.0. 

NFIB Small Business Optimism didn’t do much to counter the message from the regional indicators, falling, as it did from a recent near-term high.  There’s no question that the economy has run into a soft spot, only that some of the indicators don’t have a very good track record.

That housing is in for a double dip seems more of a certainty, both from anecdotes and from solid data, such as the recent mortgage activity.  Despite record low 30-year mortgage rates (green line), Mortgage Applications for refinances (orange) and purchases (white) fell again this week.  This is a mini-version of what John Meynard Keynes called a liquidity trap.  Rates can be pushed ever lower with no resulting spurt in economic or mortgage activity.  While probably overused, no cliche works as well to describe the phenomenon as “pushing on a string.”

Those watching for lurking inflation will need to look around the next corner because it didn’t come this week.  The Producer Price Index fell to a 2.8% annual rate and just 1.1% when looking at Core PPI.  Prices at the consumer level were similarly subdued in June.  The headline Consumer Price Index slowed to a 1.1% annual rate and, net of food and energy prices, stayed at a 0.9% annual rate.

Next week

Housing, housing, housing

Key indicators to watch

• National Association of Home Builders Housing Market Index (July) – Monday
• Housing Starts (June) – Tuesday
• Building Permits (June) – Tuesday
• Initial Jobless Claims (weekly) – Thursday
• Existing Home Sales (June) – Thursday
• House Price Index (May) – Thursday
• Leading Economic Indicators (June) – Thursday

Graig P. Stettner, CFA, CMT

Vice President & Portfolio Manager

Tower Private Advisors

Magazine covers are contrary indicators.  They reflect the notion that, by the time the editor approves a cover story, he or she has to be convinced in his or her own mind that such a cover is going to boost readership.  That’s not likely until the popular conscience is on high alert.  And by that time the smart money is long gone.  In fact, the weak hands are just as likely to sell their shares to the smart money.

This isn’t to suggest that the problems with Europe are past, just that the performance of European investments might be set to reverse–at least for a while.  In fact, you should read the article, but the cover story should alert you to the possibility that now is not the time to bail out.  One should get a better chance to do that later.

Here’s a look at the EMU index.  The downtrend has been established since late 2009, and the index is off by 50%.

You might not have noticed it at first, but there’s a highlight on the front cover that bears a comment:  “Why gold has probably peaked.”  If that included some attention-getting picture and consumed the front cover, it would probably be a signal to go out and buy gold.  One thing that popular magazines are not good at doing is divining the end of a trend, and you could say that gold has been in a trend.  That The Economist thinks the trend is over is not likely to put an end to it.

Below

• Summer rally underway
• Mixed economics, but Jobless Claims poised to improve

Prior posts

•  Gold . . . too late?
• Yet another magazine cover

Capital Markets Recap

Too many bears swung the pendulum too far over the past two weeks, and we appear to be in the midst of a good summer rally.  Not the least of the bearish omens was the much-ballyhooed Death Cross, where the 50-day moving average crossed below the 200-day moving average, supposedly heralding horrendous returns.  Not so far.

Turns out that about 3/4 of the time, equity returns are positive six months following such an occurence.  As usual, what gained notoriety for the phenomenon was its most recent performance–one of many rules on my office wall:  “big, vivid, easy to recall events are less likely than you think they are”.  We’re pretty good at that, remembering only the most recent occurences.  And, indeed, they did produce horrendous results, as the chart below might recall.

Three of four of our key research services remain bullish on equities–although one eponymous services reduceds its bullishness.  The missing fourth is–by their own admission–late on catching turns in markets, focusing instead on riding big trends.  The services have, however, made changes to their sector and asset class allocations.  One consistent theme is a bullish bias toward Emerging Markets.  We’ve been heavy in emerging markets equities for a while now, and in the last week we chose to add an allocation to emerging markets debt.

Other Investment Ideas

• With Treasury yields plumbing new depths (a sign in our lobby informs visitors that our mortgage rate is 4.125%–click here to send an e-mail to one of our mortgage folks for more information) inflation is not a consideration.  It will be, and when Treasury Inflation Protected Securities (TIPS)  begin to reflect that–not yet, but heading there–it’ll be time to buy those.
• Gold is in the midst of a sell-off.   Don’t ask why, you wouldn’t understand.  In addition, it’s making lower lows and lower highs, the signs of a downward trend.  Eventually, it’ll be time to buy more–if only for a trade–but my guess is that price is around $1,150 (today’s close $1,211.60).  On GLD look for $111 – 113.

Top Stories

• Google saw its Chinese license renewed.  In response its shares rallied smartly, up 10% in five days.  We like GOOG for its cloud-computing (i.e. applications in the ether, not on the desktop) exposure.
• Berkshire Hathaway “may have $800 million writedown on asset declines.”
• Big call option trade on the Finance sector SPDR (273,000 calls traded today) suggests someone’s banking on a rally in the finance sector.
• The G-7 includes the following countries:  Canada, France, Germany, Italy, Japan, United Kingdom, and United States.  Only one has managed–and just this week–to recoup all of the jobs lost in the recent global recession, and it’s the most recent addition to the list, Canada. 
• The Treasury Department released its Semi-Annual Report on International Economic and Exchange Rate Policies.  Of particular interest to Congress is the section on China. Again, the Treasury Department stopped short of calling China a currency manipulator, instead applauding its moves toward a floating currency, which steps have included removing the country’s peg to the dollar.  That did nothing to assuage the public servants in the Legislative Branch–such luminaries as Chuck Shumer, who, never having had passing grades in Econ 101, still wants to slap a 27.5% tariff on Chinese goods.  Uh, Fort Wayne to Chuck:  it’s our own fault; we buy the stuff.  Make the Chinese mad and they might just dump a few billion Treasuries.  We’d be wise to remember that, were it not for the Chinese recycling its U.S. dollars into Treasuries, our interest rates would be far higher.  The only reason they’re not is because the dollar is a reserve currency.  Be careful what you wish for, Chuckie, this currency stuff isn’t Child’s Play.
• Due to generous discounting, U. S. Retail Sales rose at their quickest pace in four years, according to Bloomberg.
• BP CEO Tony Hayward is jetting around the globe, ostensibly trying to enlist the support of various nations, in forms ranging from direct investment to joint ventures to business as usual–chances are good he’s dropping off his resume–pardon me, at that level it’s probably a Curriculum Vitae.  This sounds an awfully lot like Lehman Brothers trying to raise capital from soveriegn wealth funds, and that sends chills down one’s spine.  And yet, the stock is up north of 22% in a week.

This Week

There wasn’t much going on in the land of economics this week.  The ISM Non-Manufacturing report was weaker than expected, suggesting the service sector is growing at a slower pace.  Initial Jobless Claims fell by 21,000 to come closer to penetrating the lower bound of the triangle that’s formed in the series.  If it were a stock, we’d say the triangle represents a consolidation phase and the “stock” would continue in the former direction, which is to say, in this case, lower.

Consumer Credit continued to decline, as it has been doing since late 2008.  On a five-year chart it does indeed look like a sign of some new-found frugality, but a longer-term chart confirms that, at best, it’s a start on the right track. 

Next Week

In contrast to this week, next week is loaded with releases.

Key indicators to watch

• Producer Price Index (June) – Thursday – the fear du jour is deflation, so watchers will key in on these two series.
• Consumer Price Index (June) - Friday
• Retail Sales (weekly) – Wednesday – increasing chatter is being heard around the consumer, looking for signs of weakening in spending
• July 14 FOMC Minutes – Wednesday
• Initial Jobless Claims (weekly) – Thursday

Lesser indicators

• NFIB Small Business Optimism (June) – Tuesday
• Empire State Manufacturing index (July) – Thursday
• Capacity Utilization & Industrial Production (June) – Thursday
• Philly Fed index (July) – Thursday
• University of Michigan Consumer Confidence (preliminary July) – Friday

Questionable

• The American Grandstand Congress will hold hearings on Federal Reserve nominees to the Board of Governors:  Janet Yellen (San Francisco Fed President) as Vice Chair, and Peter Diamond and Sarah Bloom Raskin as plain ol’ governors.  Their views as expressed in the hearing could give some clues as to where monetary policy might be heading.

Graig P. Stettner, CFA, CMT

Vice President & Portfolio Manager

Tower Private Advisors