The Dow's Week Ahead: Focus on These 3 Economic Reports

The Dow is waiting for earnings season, but economic data will continue to have a big impact on the market.

Jun 15, 2014 at 7:03PM

After suffering losses last week, the Dow Jones Industrials (DJINDICES:^DJI) will have one more week of respite from earnings reports before athletic-apparel giant Nike reports on June 26. Dow investors should keep their eyes open for possible updates on guidance for the second quarter, but most of the attention this week will go toward analyzing economic data and their potential implications for the long-term health of the U.S. economy.

Monday: Industrial production
On Monday, the Federal Reserve will release the latest figures on industrial production and capacity utilization. Last month, the Fed's report showed a 0.6% drop in its industrial production index, reversing course after gains of 1.1% in February and 0.9% in March. But for May, economists anticipate a 0.5% rise in industrial production and a jump in capacity utilization as well.

US Industrial Production Index Chart

US Industrial Production Index data by YCharts

Over the past several years, industrial production has risen at roughly a 3% to 4% clip, which is consistent with the steady plodding progress in the overall economy. Despite gains of about eight percentage points in capacity utilization rates since early 2010, the industrial economy is still well below full capacity. Somewhat interestingly, capacity utilization rates in the mining sector remain extremely high even though commodities prices have been low. Further strength could bolster the prospects for General Electric (NYSE:GE), which has shown interest in getting into the mining-equipment business, and could predict better results for Caterpillar (NYSE:CAT) and other heavy-equipment manufacturers in the future as well.

Tuesday: Housing data and CPI
On Tuesday, economists give a double-dose of information to the market. The Census Bureau will issue May figures for housing starts and permits, and the Bureau of Labor Statistics will give its latest reading on inflation with its Consumer Price Index.

US Housing Starts Chart

US Housing Starts data by YCharts

Housing starts have trended upward for the past five years, and even though most economists expect a pullback in May from April's figures, expectations for more than 1 million housing starts and new-home permits show the continued strength in the construction segment. April's jump of more than 26% from year-ago levels for housing starts and 8% for permits built enthusiasm among investors for housing construction. Yet even a repeat of such positive news won't necessarily be welcome for traditional homebuilders, because most of the activity in the residential construction market recently has come from multi-family projects like apartment buildings and condominiums. Investors should watch careful to see if the same disparity between single-family and multi-family homes persists.

Meanwhile, the CPI is expected to rise 0.2%, showing the continued moderation of price increases yet also dispelling concerns about possible deflation. Given the recent turmoil in Iraq, a rise in gasoline prices could eventually push through to the CPI, although it won't affect the May numbers to be released on Tuesday. For Dow investors, the real key is looking at price changes for particular items and how they affect margins. In particular, food costs have major implications for McDonald's (NYSE:MCD), which could use some moderation in the price of the ingredients it uses for its menu offerings in order to offset weakness in revenue.

US Consumer Price Index Chart

US Consumer Price Index data by YCharts

Keep your eyes open
Economic data won't be the only thing moving the Dow Jones Industrials this week, but smart investors will still look at the numbers to see how they fit into their long-range forecasts. Although focusing on month-to-month fluctuations can leave you whipsawed, paying attention to the overall course of economic growth is vital to make good investments.

You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW, and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion-dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made in China" for good. Click here!

Dan Caplinger owns shares of General Electric. The Motley Fool recommends BMW, McDonald's, and Nike and owns shares of General Electric and Nike. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information