ESU9 For 08/27/2009

How To Use

Fed Announcements

GDP
8:30 AM ET

Jobless Claims
8:30 AM ET

Corporate Profits
8:30 AM ET

EIA Natural Gas Report
10:30 AM ET

3-Month Bill Announcement
11:00 AM ET

6-Month Bill Announcement
11:00 AM ET

7-Yr Note Auction
1:00 PM ET

Fed Balance Sheet
4:30 PM ET

Money Supply
4:30 PM ET

James Bullard Speaks
5:00 PM ET

With some major announcements in the offing an hour prior to the opening, there should be some extreme volatility early on in the trading session as the traders sort the the meaning and long term ramifications of the GDP and employment numbers.  As for me, I generally avoid being in the market anywhere near the time of the announcements as the market tends to stagger about like a drunken sailor.  The general expectation for the GDP is:

Market Consensus Before Announcement
GDP for its initial estimate for the second quarter showed the economy contracting by only 1.0 percent, following a revised 6.4 percent drop in the first quarter. Pulling down GDP in the latest quarter were business fixed investment, housing, personal consumption, and inventories. Strength was found in a sharp narrowing in the trade gap and a rebound in government spending. On the inflation front, the GDP price index rose a meager 0.2 percent after gaining a revised 1.9 percent in the first quarter.

On the jobless report, the general expectation is:

Market Consensus Before Announcement
Initial jobless claims for the August 15 week rose 15,000 to 576,000. Continuing claims for the August 8 week rose 2,000 to 6.241 million for a second increase in three weeks. There were no special factors skewing the data.  The general consensus for this week is a job loss of 560,000 jobs. Good grief.

Yesterday Atlanta Fed President had this to say:

From Atlanta Fed President Dennis Lockhart: The U.S. Economy and the Employment Challenge

On the economic outlook:

With respect to growth, my forecast envisions a return to positive but subdued gross domestic product (GDP) growth over the medium term weighed down by significant adjustments to our economy. Some of these adjustments are transitional in the sense that they impede the usual forces of recovery. Among these are the rewiring of the financial sector and the need for households to save more to repair their balance sheets.

Some of these adjustments, however, are more “structural” in nature. By this, I mean that the economy that emerges from this recession may not fully resemble the prerecession economy. In my view, it is unlikely that we will see a return of jobs lost in certain sectors, such as manufacturing. In a similar vein, the recession has been so deep in construction that a reallocation of workers is likely to happen—even if not permanent. …

My forecast for a slow recovery implies a protracted period of high unemployment. And labor market weakness is a concern I hear about often as I travel around the Southeast.