The stock market should continue to climb this week, if only in anticipation of additional fiscal stimulus by month end when the $600 bonus weekly payment to the unemployed is set to expire. Day-to-day volatility also should continue, as corporate earnings, infection rates, vaccine test results, renewed shutdowns, and still strong data assert themselves in the headlines. This week's US economic data calendar is light but are expected to feature strong June Home Sales.
As of now, it looks like Democrats and Republicans are moving toward a stimulus package between $1-2 Tn dollars. It would include help for state & local governments as well as for the unemployed. An amount toward the upper end of this range would probably elicit a positive response by the market.
Many Street economists are tracking daily and weekly data to get an early sense of a slowdown or speedup in growth. A number of these data suggest the surge in late May and early June is ending. But, so far the official economic data do not show an end to above-trend growth. The Claims data fell in the latest week, despite the possibility of a post-holiday increase. They show the improvement in labor market conditions is solid. While one more week's worth of the Claims data is needed for a complete read on what they suggest for July Payrolls, at this point they do not rule out another speedup in the latter. Also, even though the Philadelphia Fed Mfg Index fell a bit in July, it still leaves open the door for a 50+ level in the July Mfg ISM.
This week's US economic data are expected to provide more evidence of a strong comeback by the housing sector. Consensus looks for a 26% jump in Existing Home Sales to 4.71 Mn Units from 3.91 Mn in May. It expects +3.6% m/m in New Home Sales in June after the +16.6% surge in May. The July Markit Mfg and Services PMIs are seen breaking above 50. But, they would be just catching up to the Mfg Mfg and Non-Mfg ISMs, which were both above 50 in June.
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