Financial Options

While there are plenty of economic numbers due out this week, weak reports are almost such a foregone conclusion for several – especially those related to new home construction and industrial production – that watching them is a more a matter of staying in practice than looking for any real insight. Two numbers due out early in the week will be worth watching because they will give some indication of just how much leeway the government has with all the fiscal stimulus and bailout spending before it begins to impact the value of the dollar – Treasury International Capital and CPI.

The Treasury International Capital data due out Monday is a prime indicator of the willingness of foreign investors to stay in dollar assets. So far, the global economic downturn has led investors to the dollar as a safe haven, despite the Fed's virtual printing presses running at breakneck speeds. If investors are stocking up on long term US securities, that's a further indicator that this pattern will continue and that the government will be able to finance all this activity.

Last week, the Producer Price Index (PPI) showed deflation in the headline number and essentially no inflation in the core number. If the CPI number (Tuesday) is similar, that will be an indicator that there is room domestically for further government borrowing and spending.

Also Tuesday, the Federal Reserve will announce an interest rate decision. There's not much room for further rate cuts, so it will be interesting to see the accompanying statement for any indication of future plans.

Thursday, jobless claims will get lots of attention with all the bad news in the labor markets the last 3 weeks. Also Thursday, the Conference Board will release the index of leading economic indicators; this is the single broadest index for forecasting future economic activity.

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