Sandwiched between two extremely busy weeks, a quiet period is on tap in the upcoming week – for data at least.
After the “pageantry” of the first presidential debate, there is a hope that Wednesday’s undercard debate between Vice President Mike Pence and Senator Kamala Harris will be a bit more low-key and centred on the issues. It also takes on new importance as President Trump’s positive COVID test could alter the timing of the next debate, currently scheduled for October 15, as well as recalibrating the significance of the vice presidency.
The first round of Trump-Biden did raise some points amidst the noise on topics such as race, policing, the Supreme Court, the economy and COVID-19. Wednesday’s debate should clarify some of the key points of the two campaigns before the bell rings for the second round of the main event in the following week if it stays on the schedule.
Also released on Wednesday, the minutes of the September 15-16 FOMC meeting. The statement at that meeting didn’t break any new ground, just a reiteration of the flexible inflation targeting introduced prior to the meeting.
The Summary of Economic Projections showed no rate hikes are expected through 2023, as most participants saw full recovery to be way off. A readout of the discussion may provide more texture.
Regional services conditions improved further in September
After declining in August, the ISM service measure is expected to rebound in September, backed up by gains in the regional measures. The ISM’s reading fell last month to 56.9 from 58.1 in July, still indicating solid expansion for the third straight month.
In September, there were gains in the Philadelphia, Richmond and Dallas Fed regional measures, but a decline in the Kansas City Fed’s measure to a negative reading.
The services sector remains volatile, dependent more on COVID-19 fluctuations than the manufacturing sector as states usually target restaurant capacity first when they need to tighten restrictions.
Markit will update its September reading just before the ISM release on Monday. In the flash estimate, Markit said its services reading fell slightly to 54.6 from 55.0 in August.
Sources as listed
Initial claims showing little movement in recent weeks
The level of initial claims declined in the September 25 week, but remained in the same tight range it has been in for the last five weeks.
The stability suggests that things are getting neither better nor worse. That could change as major airlines and the Disney Company have announced layoffs. Other businesses are likely to follow suit as stimulus measures expire.
The four-week moving average has declined for nine straight weeks. It could make it to 10 weeks unless claims rise sharply in the upcoming week to offset the 893,000 level in the September 5 week that is rolling out of the calculation.
At the same time, continuing claims should remain on a downward trend, due again to a combination of displaced workers finding jobs and others seeing their benefits expire.
Separately, from Extract Analytics, a look ahead at stocks in the upcoming week suggests that for the S&P, if the seasonal pattern holds, there should be a peak around October 7.