A week ahead with enough economic date to move stock markets

01/25/2010 10:36 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Get set for a week of economic news—and spin. And it’s how the numbers are spun that will determine if the recent stock market slide continues or shifts into a resumption of the rally.

The big number, of course, is due on Friday when the U.S. government releases fourth quarter GDP numbers. Economists are expecting growth at an annual rate of 4.5% for the quarter.

Great—except that a little analysis is likely to show disconcerting weakness in the numbers.

Personal consumption, an important number since consumer spending accounts for 60% to 70% of U.S. economic activity—is expected to come in at just a 1.8% annual rate of growth. That would be a significant decline from the 2.8% growth rate of the third quarter.

A decline like that would be enough to revive fears that the U.S. economic recovery isn’t sustainable.

Earlier in the week—Tuesday, January 26 to be exact—we’ll get consumer confidence numbers from the Conference Board. The consensus is that the release will show confidence essentially unchanged at 54 in January, up from 52.9 in December. (The Michigan sentiment index comes out on Friday.)

The Case-Shiller Index for housing prices is also released on Tuesday. This data comes with a considerable lag—the numbers released on January 26 will be for November—but the index is likely to depress market sentiment. The consensus is that housing prices will show a scant 0.1% increase.

New home sales for December come out on Wednesday. The consensus now is for an increase to 370,000 from November’s 355,000.  I doubt that will be enough to erase the Case-Shiller snapshot of a stagnant housing market.

Wednesday is also spin day—or actually spin evening. In that night’s State of Union Address President Obama will try to convince voters that things are at least not any longer getting worse and that he has a plan to reduce unemployment and increase financial security for the average family. The subsequent Republican response, delivered by newly elected Virginia governor Robert McDonnell, will, I’d be willing to bet, attack the Democrats as the party of big government and run away deficits. I’m interested to see if McDonnell, touted as a rising star in the party after his November victory, offers any positive proposals from his party for getting people back to work.

The sentiment produced by that evening’s spin will frame the GDP growth numbers released two days later. And the stock market’s response.
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