Week Ahead: China's GDP Keys Newswire

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The week ahead highlights China's fourth quarter GDP report, which we view as a key market catalyst for the period. China's early move last week to rein in its banks' lending seems to offer insight into a hot GDP report out of the giant industrialist. We expect this will be a positive driver this week for commodities and perhaps stocks as well, as investors look toward Asia to lift global demand.

In the States, our own Leading Indicators are due for December this week, offering insight into China's impact on our own economy. Housing Starts and Producer Price data are also due, but look for news out of Washington to play a pivotal role for the stock market and to capture the nation's interest. Massachusetts voters will replace the late Edward Kennedy this week in a vote that could impact President Obama's health care reform legislation. Also, the House Financial Services Committee will take up the topics of executive pay and bank failures. Get revved up for an interesting week...

Week Ahead - China's GDP Key

Monday

Financial markets are closed Monday for Martin Luther King Day. Overseas in Italy, the fraud trial of Prime Minister Silvio Berlusconi is scheduled to continue.

Tuesday

In perhaps the critical event of the week ahead, China will report its fourth quarter GDP as early as Tuesday. However, no date has been provided. Given that just last week the Chinese government initiated new economic brakes on its economy, expect a hot GDP growth rate to show up this week. This should give new life to commodity prices that suffered on last week's dip, and might revive global equity values as well.

The Treasury International Capital (TIC) Report for November is due at 9:00 a.m. The latest report covering the month of October showed that Net Foreign Purchases of Long-Term Securities were $20.7 billion. Getting to this figure, net foreign purchases of long-term US securities were $43.4 billion, and net purchases of long-term foreign securities by US residents were $22.7 billion. Within the foreign purchases of US securities, $14.6 billion were by foreign official institutions. After adjustment for other net acquisitions of long-term securities, the Net Foreign Acquisition of Long-Term Securities bottom line tallied $8.3 billion. Both foreigners' net purchases of US securities and US resident net purchases (actually sales this year) of foreign securities are down over the twelve months through October 2009, a sign of the times.

Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $43.9 billion. Foreign holdings of Treasury bills decreased $38.3 billion. Monthly net TIC flows were negative $13.9 billion. Of this, net foreign private flows were negative $32.1 billion, and net foreign official flows were $18.2 billion.

State Street's (NYSE: STT) Investor Confidence Index is due for report at 10:00 a.m. December's data showed a 3.1 point improvement to a mark of 103.9. The North American component of the metric improved just 0.9 points to 103.1, with a 6.3 point gain in Asia-Pacific outweighing the US decline and a 0.2 point drop in Europe (thanks to Greece, Ireland and Spain). Confidence in Asia marked an eight-month high. State Street's overall reading of confidence is down from its August peak of 122.8, but far above the 12-month low of 82.8, marked in December 2008. According to State Street, institutions are still adding to risk in their portfolios, but at a slower pace.

The State Street Investor Confidence Index measures the attitude of investors to risk. Developed by Harvard Professor Ken Froot and State Street Associates Director Paul O'Connell, the Index uses the principles of modern financial theory to model the underlying behavior of global investors. Unlike other survey-based confidence measures that focus on expectations for future prices and returns, the Index provides a quantitative measure of the actual and changing levels of risk contained in investment portfolios representing about 15% of the world's tradable assets.

The National Association of Home Builders will report its Housing Market Index at 1:00 p.m. Builders' confidence declined in December, as the HMI fell a point to a mark of 16. December measured the lowest confidence mark since June of 2009. The First-Time Homebuyer Tax Credit is helping housing, but not builders' confidence. The credit is set to help the seasonally favorable spring real estate market, but its end is scheduled. Prospective purchasers of a principal residence can now benefit from the tax incentive if they enter into a binding contract to buy a home before April 30, 2010, and close on the home by June 30, 2010. With lending constraints tight and with the employment picture remaining questionable, true real estate market recovery may be slow still in revving up.

ABC & The Washington Post will publish their Consumer Comfort Index Tuesday. The state of Massachusetts will vote to fill the Senate seat vacated by the late Edward Kennedy. The race for the seat is tight and meaningful, with health care reform hanging in the balance.

Navistar International (NYSE: NAV) has its analyst day scheduled; Progress Energy (NYSE: PGN) is expected to update its operating guidance; and Devon Energy (NYSE: DVN) is scheduled to present at the Independent Petroleum Association Conference. Kraft (NYSE: KFT) comes up against its deadline to raise its bid for Cadbury (NYSE: CBY), while outside bidders have until January 23rd to make an offer. Hershey (NYSE: HSY) is rumored to be on that short list.

The corporate earnings schedule includes news from Citigroup (NYSE: C), CSX (NYSE: CSX), International Business Machines (NYSE: IBM), BancFirst (Nasdaq: BANF), Cree (Nasdaq: CREE), Fastenal (Nasdaq: FAST), First Horizon National (NYSE: FHN), Forest Labs (NYSE: FRX), Fulton Financial (Nasdaq: FULT), Green Bankshares (Nasdaq: GRNB), Hancock Holding Company (Nasdaq: HBHC), II-VI (Nasdaq: IIVI), Lee Enterprises (NYSE: LEE), McMoRan Exploration (NYSE: MMR), Mercantile Bank (Nasdaq: MBWM), New Oriental Education (NYSE: EDU), Parker Hannifin (NYSE: PH), PetMed Express (Nasdaq: PETS), Pharmaceutical Product Development (Nasdaq: PPDI), Pinnacle Financial Partners (Nasdaq: PNFP), Renasant Corp. (Nasdaq: RNST), Student Loan (NYSE: STU), Supertex (Nasdaq: SUPX), TD Ameritrade (Nasdaq: AMTD) and TESSCO (Nasdaq: TESS).

Wednesday

In the week ended January 8, the Mortgage Bankers Association's Market Composite Index of mortgage activity increased 14.3%. The index benefited from a dip backward in fixed rate mortgage rates, after a rise the week before led to a drop-off in refinance activity. This last week, contracted rates for 30-year and 15-year fixed rate mortgages dropped to 5.13% (from 5.18%) and 4.45% (from 4.62%), respectively. This led a Refinance Index gain of 21.8%. The Purchase Index increased 0.8%.

The International Council of Shopping Centers (ICSC) data posted last week showed a week-to-week sales drop-off of 3.0% in the week ended January 9. The post holiday period should decline on a weekly basis, but the year-to-year change showed only a 1.7% sales gain, versus 2.5% the week before. The ICSC theorized, likely correctly mind you, that tight inventory management kept retailers from needing to mark down product for an extended period this year. Last year was a different story, and with bargain conscious shopping dominating the aisles, expect weaker sales growth this month.

Housing Starts are due for report at 8:30 a.m. Economists are looking for a modest improvement in December, to an annual pace of 579K, from 574K in November. November starts were up after an October decline due to the timing of the First-Time Homebuyer Tax Credit.

Following up on last week's Consumer Price Index Report, which showed CPI and Core CPI up just 0.1%, the Producer Price Index (PPI) comes due this week. Economists are looking for no change on the Headline measure of producer prices, with a 0.1% increase seen for the Core PPI. Recall, the "core" measure excludes volatile food and energy prices.

BHP Billiton (NYSE: BHP) is scheduled to publish its quarterly production results. Berkshire Hathaway (NYSE: BRK-B, NYSE: BRK-A) holds a meeting to vote on whether to split its Class B shares 50-to-1 for use in its acquisition of Burlington Northern Sante Fe (NYSE: BNI).

The corporate earnings schedule is heavy on financials Wednesday. Look for earnings news from Bank of America (NYSE: BAC), U.S. Bancorp (NYSE: USB), Wells Fargo (NYSE: WFC), Morgan Stanley (NYSE: MS), Bank of NY Mellon (NYSE: BK), State Street (NYSE: STT), Northern Trust (Nasdaq: NTRS), Coach (NYSE: COH), eBay (Nasdaq: EBAY), Starbucks (Nasdaq: SBUX), ADTRAN (Nasdaq: ADTN), Amdocs Ltd. (NYSE: DOX), AMR Corp. (NYSE: AMR), Applied Industrial Technologies (NYSE: AIT), ASML Holdings (Nasdaq: ASML), Brinker International (NYSE: EAT), Community Trust (Nasdaq: CTBI), Courier (Nasdaq: CRRC), Covidien (NYSE: COV), Dr. Reddy's (NYSE: RDY), F5 Network (Nasdaq: FFIV), Hudson City Bancorp (Nasdaq: HCBK), iGate Corp. (Nasdaq: IGTE), Jefferies (NYSE: JEF), Kinder Morgan Energy Partners (NYSE: KMP), LaBranche & Co. (NYSE: LAB), LG Display (NYSE: LPL), Logitech (Nasdaq: LOGI), M&T Bank (NYSE: MTB), Marshall & Isley (NYSE: MI), NVE Corp. (Nasdaq: NVEC), Pacific Shipping Trust (Singapore: P48U.SI), Plexus (Nasdaq: PLXS), Provident Bancorp (Nasdaq: PBNY), Pulaski Financial (Nasdaq: PULB), Raymond James (NYSE: RJF), Seagate Technology (NYSE: STX), Skyworks (Nasdaq: SWKS), SLM Corp. (NYSE: SLM), Total System Services (NYSE: TSS), Wipro Ltd. (NYSE: WIT), Woodward (Nasdaq: WGOV) and Xilinx (Nasdaq: XLNX).

Thursday

Weekly Initial Jobless Claims headlines the morning wire on Thursday. Still high on holiday euphoria, last week's new benefits filers amounted to just 444K (Week Ended Jan 9), up 11K from the prior week. Economists are looking for 440K this time around. The four-week moving average stands at 440,750, and has declined for 19 straight weeks. That's a trend worth writing home about, but claims have yet to normalize, and until the bleeding stops, this economy stands crippled.

After hearing China's GDP news, economists will be looking for some benefit in the Leading Indicators here in the US, which will be reported on Thursday morning at 10:00 AM. After a 0.9% increase in November, economists are looking for moderation of growth to 0.7% in December.

The Philadelphia Fed Survey is due at 10:00 a.m. as well. The index improved to 22.5 in December, but economists are looking for some moderation in January's first look, to 18.0. Similar surveys from New York and Chicago have supported the Philly data of late. New York's Empire State Manufacturing Survey showed last week that its General Business Conditions Index recovered ground, moving to 15.9, up from 4.5 before that.

The EIA's Natural Gas and Petroleum Status Reports will both be released on Thursday this week, due to the holiday. At 10:30, we will get a first look at Natural Gas inventories. In the week ended January 8, nat gas stocks declined by 266 Bcf, and the great draw of 2009/2010 continues. Stores of natural gas stand now only 121 Bcf higher than the five-year average for this time of year. Expect to see more pressure on natural gas prices as usage is closing inventory down at a rapid rate.

The EIA's Petroleum Status Report is up at 11:00 a.m. this week. For the week ended January 8, crude oil inventory increased by 3.7 million barrels, and stands above the upper limit of the average range for this time of year. Gasoline stores increased by 3.8 million barrels and stood above the upper limit of the average range. Distillate fuel stocks increased by 1.4 million barrels last week, and are also above the upper boundary.

Look for the Fed Balance Sheet and Money Supply data in the late afternoon. Also in Washington, the House Financial Services Committee will inspect the bank failure situation.

DealFlow Media is hosting an activist investor conference in New York. WGL Holdings (NYSE: WGL), Scientific Games (Nasdaq: SGMS) and Watson Pharmaceuticals (NYSE: WPI) have analyst meetings arranged. The earnings schedule highlights news from Google (Nasdaq: GOOG), Goldman Sachs (NYSE: GS), American Express (NYSE: AXP), BancorpSouth (NYSE: BXS), Brookline Bancorp (Nasdaq: BRKL), Burlington Northern (NYSE: BNI), Capital One Financial (NYSE: COF), Comerica Inc. (NYSE: CMA), Conexant Systems (Nasdaq: CNXT), Consolidated Edison (NYSE: ED), Continental Airlines (NYSE: CAL), Cubist Pharmaceuticals (Nasdaq: CBST), Digi International (Nasdaq: DGII), Electronics for Imaging (Nasdaq: EFII), Emulex (NYSE: ELX), EZCorp (Nasdaq: EZPW), Fairchild Semiconductor (NYSE: FCS), Fifth Third Bancorp (Nasdaq: FITB), First Niagra Financial (Nasdaq: FNFG), First Security Group (Nasdaq: FSGI), Freeport-McMoRan (NYSE: FCX), GATX Corp. (NYSE: GMT), Homebancshares (Nasdaq: HOMB), ICICI Bank (NYSE: IBN), Imation (NYSE: IMN), Independent Bank (Nasdaq: INDB), Insteel Industries (Nasdaq: IIIN), Interactive Brokers (Nasdaq: IBKR), International Game Technology (NYSE: IGT), Intuitive Surgical (Nasdaq: ISRG), ITT Educational (NYSE: ESI), J&J Snack Foods (Nasdaq: JJSF), KeyCorp (NYSE: KEY), Knight Capital Group (Nasdaq: NITE), Legg Mason (NYSE: LM), LSI Industries (Nasdaq: LYTS), Matthews International (Nasdaq: MATW), MDS Inc. (NYSE: MDZ), Meredith Corp. (NYSE: MDP), Meridian Bioscience (Nasdaq: VIVO), Microsemi (Nasdaq: MSCC), NetScout Systems (Nasdaq: NTCT), OceanFirst Financial (Nasdaq: OCFC), Pacific Continental (Nasdaq: PCBK), People's United Financial (Nasdaq: PBCT), PNC Financial (NYSE: PNC), PPG Industries (NYSE: PPG), Precision Castparts (NYSE: PCP), Simmons First National (Nasdaq: SFNC), Somanetics (Nasdaq: SMTS), Southwest Airlines (NYSE: LUV), Sterling Bancshares (Nasdaq: SBIB), SVB Financial (Nasdaq: SIVB), Synaptics (Nasdaq: SYNA), TCF Financial (NYSE: TCB), Twin Disc (Nasdaq: TWIN), Union Pacific (NYSE: UNP), UnitedHealth Group (NYSE: UNH), Urologix (Nasdaq: ULGX), Valley National Bancorp (NYSE: VLY), Westamerica Bancorporation (Nasdaq: WABC), Western Alliance Bancorp (NYSE: WAL), Western Digital (NYSE: WDC), Wilshire Bancorp (Nasdaq: WIBC), WNS Holdings (NYSE: WNS) and Xerox (NYSE: XRX).

Friday

While there are no economic reports on the slate, there will be plenty to mull over. The House Financial Services Committee takes up executive compensation today. President Obama will meet with small business representatives to discuss the economy and the small business situation. Hiring in the small business sector is said to be "gun shy" due to concerns about legislation and the surety of economic recovery. The Chief Investment Officer of the TARP program, Jim Lambright, gives a speech in New York.

In corporate news and events, General Electric (NYSE: GE) will report results before the open. Agrium's (NYSE: AGU) offer to buy CF Industries (NYSE: CF) is due to expire Friday. The earnings slate includes news from Air Products & Chemicals (NYSE: APD), AMCOL International (NYSE: ACO), AVX Corp. (NYSE: AVX), BB&T Corp. (NYSE: BBT), Exelon (NYSE: EXC), Harley-Davidson (NYSE: HOG), Huntington Bancshares (Nasdaq: HBAN), Johnson Controls (NYSE: JCI), Kimberly-Clark (NYSE: KMB), MB Financial (Nasdaq: MBFI), McDonald's (NYSE: MCD), Prosperity Bancshares (Nasdaq: PRSP), Schlumberger (NYSE: SLB), Southern Community Financial (Nasdaq: SCMF), State Bancorp (Nasdaq: STBC), SunTrust (NYSE: STI), Telefon AB Ericsson (Nasdaq: ERIC) and Webster Financial (NYSE: WBS).


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