The 3 Economic Reports Dow Investors Must Watch This Week

Don't ignore the economy even as companies report earnings.

Jul 20, 2014 at 7:02PM

The Dow Jones Industrials (DJINDICES:^DJI) will see a surge of earnings results this week, as nearly a dozen of its components will reveal what happened to them over the past quarter. But economic data will continue to flow in, and smart investors will keep an eye on the trends that they suggest and the impact that they'll have. In particular, investors will want to watch whether price pressures start to put pressure on the Fed to raise interest rates, potentially affecting Dow banks JPMorgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS). Also, results on home sales and durable goods orders will have implications for the broader economy.

The latest Consumer Price Index figures will come out on Tuesday morning. Economists expect the CPI 0.3%, moderating somewhat from their 0.4% increase in May but still remaining above the annualized 2% target that the Fed prefers to see. Despite the recent acceleration in the index, year-over-year gains remain in check, and the central bank will likely wait to see a more established upward trend before risking taking action to hasten its long-term plan to start raising interest rates at some point in the next year or so. Nevertheless, JPMorgan Chase and Goldman Sachs both have exposure to interest rates through the bond market and other business lines, and any surprisingly high CPI figures could make their shareholders nervous about their immediate future.

US Consumer Price Index Chart

US Consumer Price Index data by YCharts

Home sales figures will come out on Tuesday and Thursday, with existing home figures expected to climb around 2% to 4.99 million. Economists expect new home sales data, which are due out Thursday, to reflect a roughly 6% drop to 475,000, giving back a portion of the extraordinary 18.6% rise that they experienced in May. For homebuilders, the good news has been that the trend in new home sales has been unmistakably upward in recent years, even as existing home sales reflect a somewhat less clear trajectory over the longer run. Concerns about the housing market have started to mount, though, as affordability could become a bigger issue if mortgage rates start to rise.

Finally, data on durable goods orders will be released Friday. Investors expect a 0.5% gain to help offset part of the 1% loss in the figure during May. As you can see, though, longer-term durable goods figures have been exceedingly volatile, reflecting sluggish buying in the winter months followed by a release of pent-up demand in spring. For many companies both within and outside the Dow Jones Industrials, sales of durable goods help determine what future commitments they'll make in production, creating a potential feedback loop that can either bolster economic expansion or worsen pullbacks.

US Durable Goods New Orders Chart

US Durable Goods New Orders data by YCharts

Dow investors should keep a close eye on all three of these economic reports. Doing so will help put earnings reports into better context and keep you better informed about the trends that could push stocks higher or lower in the months to come.

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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."

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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.

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