In this series, we'll explore the data announcements and events that may affect the performance of bank stocks during the upcoming week.
With earnings season over for the Big Four and other regional banks wrapping up their reports as well, bank investors should turn an eye toward the two biggest macroeconomic factors for insight into how the banks will move on from here. This coming week is a doozy for both factors -- housing and employment -- and will provide plenty of food for though and/or trading.
- Pending home sales (Monday): Showing the number of homes currently in the sales process, this index can indicate how buyers are feeling about the market and the availability of credit. For bank investors, this report can also give a sense about the number of loans currently working their way through the closing process. Though Wells Fargo (NYSE:WFC) noted that its pipeline for new loans was smaller at the end of the second quarter compared with the prior one, new surges in buyer demand could be helping drive more business to the banks.
- Case-Shiller price index (Tuesday): As we've been seeing for some time, home prices are rising because of the unbalanced supply and demand for homes. Even though the interest-rate environment remains low, higher home prices could help the banks' revenue streams by allowing a greater amount of interest to be generated from new loans with higher principal balances. Though it may want volume to drive its growth in the mortgage market, Bank of America (NYSE:BAC) could very well gain ground by selling new mortgages to its wealthier clients -- allowing larger loans to advance its place in the origination hierarchy.
- MBA purchase applications (Wednesday): There has been a solid trend of declining activity in mortgage applications over the past few weeks, with last week's report showing another 2% drop. But with interest rates falling for the first time in more than two months, there may be new incentives for buyers to lock in the low rates now.
- Construction spending (Thursday): As we've seen from the past weeks' sales reports, home inventories are below the six-month range that economists view as a good balance between supply and demand. The construction spending report will give investors a glimpse of homebuilders' confidence in the housing market's continued advances, as well as their outlook on newly constructed home sales. This report also gives bank investors a sense of whether lending to construction firms is growing or softening.
- ADP employment report (Wednesday): The ADP report gives some dimension to the labor market, as it allows investors to see the number of employees and their pay within the private sector. The data also helps investors interpret and extrapolate information later in the week when used in tandem with the Labor Department's overview of the employment situation.
- Employment cost index (Wednesday): Giving a more total picture of labor costs, the employment cost index allows investors to see wage trends as well as risks of wage inflation, which is a big no-no for the Federal Reserve and a sign that interest rates could rise.
- Jobless claims (Thursday): This weekly report has been under close scrutiny ever since Fed Chairman Ben Bernanke reiterated the Fed's focus on employment statistics. Though July has been inconsistent because of factory closures and school vacations, analysts believe that the rate of new unemployment benefit applications are consistent with a stronger labor market.
- Challenger job cut report (Thursday): Basically a rehash of the weekly jobless claims report, the Challenger report does provide some more information about where new layoffs are occurring by giving industry- and geographic-specific details.
- Employment situation (Friday): This is the big one the markets will have been waiting for all week. From the Department of Labor Statistics, the situation report gives the most complete look of the labor market: who's not working, who is working, what they get paid, and how many hours they're working. This report gives investors the greatest ability to determine the current strength of the labor market as well as its outlook.
Other important events to watch
- Federal Open Markets Committee meeting and announcement (Tuesday and Wednesday): Every six weeks, the FOMC meets to discuss the current moentary policy and the need for any changes. Following the two-day meeting, Bernanke will make an announcement of the course the committee's decisions set during that meeting. The latest speculation sees the Fed reducing its monthly bond purchases by $20 billion beginning in September, though investors will have to wait until Wednesday to find out whether there's any merit to that rumor.
- Various consumer and investor confidence reports (Tuesday and Thursday): Three reports come out this week regarding either consumer or investor confidence in the economy. Confidence plays an important role in the economic recovery, since a consumer or investor who lacks confidence is unlikely to part with his or her hard-earned money on either new goods and services or new investments.
- Personal income and outlays (Friday): Giving bank investors insight into the trends for personal income and spending, this report will be very important for both JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C), which both operate large credit card divisions. The most recent trend has been positive for both income and spending, so the credit card providers may be on the receiving end of new outlays.
This week is packed with tons of new data that can sway the market one way or the other. And though it's important for bank investors to be in the know about the facts that could affect their investments, trying to study all of it can become overwhelming. Pick a few events or reports that seem most important to your investment and start from there. And as always, you can find more coverage of all this info at Fool.com.
Fool contributor Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.