The Daily Economic News Report - Monday, July 29, 1996

T H E M O T L E Y F O O L ' S
The Daily Economic News Report
Monday, July 29, 1996

Last week I commented that Chairman Greenspan's congressional testimony had seemed to calm the bond market. Well, that didn't last very long. There are seventeen economic reports coming out this week, any one of which could give bond traders a serious scare. In fact, even today, before any of the reports were released, inflationophobia was running unrestrainedly through the bond market. The 30-year T-bond closed the day down 29/32, moving the yield back up to the 7.10 percent level. As is often the case, the bond market's behavior stampeded the stock market, and the DJIA sold off by more than 38 points.

Here's a preview of some of the major news releases that the bond market might use as an excuse to cut and run:

Tomorrow, July 30, we'll be getting a report on the second quarter employment cost index. Also, tomorrow, the report comes out on new home sales and building permits.

Wednesday, the Chicago purchasing manager's July report comes out. I prefer to ignore this and wait for the more-comprehesive National Association of Purchasing Management report which comes out on Thursday.

On Thursday, along with the NAPM report, we'll be seeing the first cut at the Gross Domestic Product (GDP) for the second quarter. Analysts expect an annualized GDP increase of 3.8 percent in the second quarter versus an increase of 2.2 percent in the first quarter.

Even if the markets don't react to the announcements on Tuesday, Wednesday, and Thursday, we still won't be out of the woods. Friday brings what has proven in recent months to be the biggest, baddest bond market bugaboo of all -- the monthly report on the employment situation. In June the unemployment rate was 5.3 percent and 239,000 new jobs were created. The forecast for July calls for a jobless rate of 5.4 percent with 195,000 new jobs.

In addition to these six reports there will another eleven releases of economic news in the next four days.

It looks like we're in for an exciting week.

Byline: Lafferty (MF Merlin)