By Theresa Sheehan

PRINCETON (SMRA) – The week ahead is shortened by the market close
Monday and the early close in the bond market again the following Friday
at 14:00 ET. The stock market will be open the full day on Friday since
it is the last business day of the year.

While there is a certain amount of data on the economic release
calendar, there is very little that will prove compelling during the
holiday lull. On the whole, we anticipate that the data will extend the
generally more upbeat tone of the numbers.

The calendar of public appearances by Federal Reserve and
government officials will remain quite sparse until after the New Year’s
observance.

Economic Data

The main themes for the economic data in the week will be
conditions in manufacturing and housing.

The surveys of manufacturing from the Richmond Fed (Tuesday at
10:00 ET), Dallas Fed (Tuesday at 10:30 ET), and Kansas City Fed
(Thursday at 11:00 ET) should add to the generally more favorable
outlook for the factory sector. The reports from the New York and
Philadelphia Districts showed some decent improvement in December. The
other Districts are likely to report modest expansion as well, and hint
at some upward momentum for the ISM national manufacturing index when it
is released on Tuesday, January 3.

The Richmond Fed will also release its survey for the services
sector at 10:00 ET on Tuesday, and the Dallas Fed survey for services is
set for 10:30 ET on Wednesday. Both should be consistent with improved
activity in December.

The Chicago Purchasing Managers Index for December at 9:45 ET on
Thursday will round out the data for manufacturing and services. This
index has been one of the stronger over the course of the recovery, and
is likely to continue that trend.

The NAR’s Pending Home Sales Index for November at 10:00 ET on
Thursday could continue to rise after the nearly 9 point jump to 93.3 in
October. Historically low mortgage interest rates are starting to have
some impact, and the housing market is showing some signs of increased
sales, albeit at still low levels.

The October S&P/Case-Shiller Home Price Index at 9:00 ET on Tuesday
should indicate that home prices are firming a bit, especially when
taken in context with the improvements in the FHFA House Price Index.
Although the year-over-year declines in prices have not quite ended, the
pace of declines is decidedly slower, and moving in the right direction.

Initial jobless claims for the week ended December 24 at 8:30 ET on
Thursday might just hold on to the declining trend of recent weeks that
places the levels near those in April 2008. If so, it will be consistent
with less slack in labor markets, and raise hopes that the national
unemployment rate will notch down a bit more in the December report when
it is released on Friday, January 6.

The Conference Board’s Consumer Confidence Index for December at
10:00 ET on Tuesday will be a footnote on the other monthly reports on
confidence. Both the IBD/TIPP Economic Optimism Index and the final
Reuters/University of Michigan Consumer Sentiment Index were higher in
December, and along with the weekly data signal that the Conference
Board measure should be up as well.

The ICSC/Goldman-Sachs Retail Activity Index for the week ended
December 24 at 7:45 ET on Wednesday will capture the last burst of
consumer shopping before stores close for Christmas and reopen on Boxing
Day for the post-holiday discounts. Although a bit uneven since the
record-breaking Black Friday on November 25, the prior week’s surge in
sales suggests that 2011 will end up solidly higher.

Central Bank Activity

No major central bank announcements are scheduled for the remainder
of December. By this time of year, central bank activity normally quiets
down until after the New Year. However, with the euro zone crisis
continuing, it opens the possibility of more surprise announcements like
that related to central bank swap lines that took place on November 30.

The next routine central bank announcements will be in the January
9, 2012 week, and include the ECB and Bank of England.

U.S. Treasury Auctions

There are no coupon auctions on the calendar in the December 26
week. The next offering of coupons will not be until Thursday, January
5, 2012, when new 3-year notes and reopenings of the 10-year note and
30-year bond are announced.

** Stone & McCarthy Research Associates **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]