Financial Options

For good or ill in other ways, last week's decision by the Treasury Department to shore up the debt obligations of Fannie Mae and Freddie Mac also sent a message worldwide that the US is serious about supporting a strong dollar. That kept oil prices heading down in spite of major production disruptions in the Gulf of Mexico, a serious downturn in US inventories and an OPEC vote to pare back production. Strong economic indicators this week, combined with a no-change announcement on interest rates from the Fed Tuesday should continue the strong dollar pattern with its implication for all markets.

Normally the Tuesday Fed announcement should be the big event of the week, but two things stand in the way. First, it's almost a foregone conclusion that the announcement will be no change. Barring a surprise move or a major shift in the announcement language looking to the next meeting, that's a nonstarter for market moves. Second, like last weekends seizure/bailout (depending who you ask) of Fannie and Freddie, this weekend promises a big announcement on troubled investment banker Lehman Brothers.

Industrial production, buoyed by exports, has been a relative strong point in the US in 2008. Monday the Federal Reserve will report on nationwide industrial production and capacity utilization (a potential indicator of inflation pressure) and the New York Fed will release the Empire State Manufacturing Survey, an important leading indicator for the national trend.

Last week brought good signs on inflation at the wholesale level, as commodity prices began to respond to the reality of monetary disinflation. The retail inflation figure, the Consumer Price Index (CPI) is out Tuesday.

Also Tuesday, the first half of the monthly builder sentiment duo, the National Association of Homebuilder's Housing Market Index, is due out. That's followed Wednesday by its «money where it's mouth is» better half, Housing Starts from the Commerce Department.

In international markets, the Treasury releases International Capital figures on Tuesday and the Bureau of Economic Analysis releases the Current Account figures Wednesday. Both of these should show the positive effects of a weak dollar and strong imports earlier in the year, though that trend is starting to reverse now.

Thursday brings the last major economic report of the week, the Leading Index from the Conference Board, before Quadruple Witching Day brings volatility to the markets Friday.

*See more information on the Financial Roadmap series here. Earnings reports are companies of interest, NOT recommendations.