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Market Update: March 28, 2016

After a holiday-shortened week in the markets, the final week of March will be the month's busiest.

This week will be bookended by closely watched readings on inflation (Monday) and the all-important March jobs report (Friday).

Federal Reserve Chair Janet Yellen is also set to speak on Tuesday afternoon before the Economic Club of New York.

"Data flow this week is likely to highlight lackluster consumer demand with unimpressive sentiment, both on the consumer and manufacturing fronts, while hiring slows a touch," economists at BNP Paribas write.

And so after a week filled mostly with data and commentary around the housing market this week will give us a broader outline of what's happening in the U.S. economy.

Top stories

  • This past week was all about housing. Over the past week, the attention of the media focused squarely on the housing market. Specifically, the lack of supply for first-time homebuyers.
  • The US economy grew more than expected to end 2015. On Friday, while stock and bond markets were closed for Good Friday, the third estimate on Q4 gross domestic product beat expectations.  In the final quarter of 2015, the U.S. economy grew at an annualized pace of 1.4%, faster than the first print's 0.7% expansion and better than the 1% pace of growth that was expected.  And this upward revision was owed, in large part, to the U.S. consumer. What are consumers buying?  Well, it's not more cars and not more paper towels, it's services.  It's all about services, such as healthcare, vacations, recreation, and haircuts.

Economic Calendar

  • Personal Income and Spending (Mon.): The February report on personal income and spending should show that incomes rose 0.1% in February while spending increased by the same amount. This month-on-month increase is expected to be down from January's 0.5% increase. This report will also give us the latest reading on personal consumption expenditures, or PCE, an alternative measure of inflation that is more closely tracked by the Federal Reserve.
  • Pending Home Sales (Mon.): Pending home sales rose solidly in February to their highest level in seven months and remain higher than a year ago.  The Pending Home Sales Index, is a forward-looking indicator based on contract signings.  The index rose 3.5% to 109.1 in February from a downwardly revised 105.4 in January and is now 0.7% above February 2015 (108.3). Case-Shiller Home Prices (Tues.): The January reading on home prices increases from the S&P/Case-Shiller survey should show a 0.7% increase against the prior month and a 5.7% increase when compared with last year. This index, which has shown a steady increase in prices over the past year, should continue to indicate that home values are rising at well above the rate of inflation.
  • Consumer Confidence (Tues.): The Conference Board's March reading on consumer confidence should rebound to a reading of 93.8, up from February's 92.2 measure. February's report sharply missed expectations. In that report, a number of respondents indicated concerns about the stock market, and given the market's recovery over the ensuing several weeks, commentary around how financial markets are affecting the economic outlook for U.S. consumers will be closely watched.
  • ADP Private Payrolls (Weds.): The March report on private payroll growth from ADP should show that private employers added 195,000 jobs during the month. This number would be down from 214,000 in February but still indicate a solid pace of job growth in the economy.
  • Initial Jobless Claims (Thurs.): The latest weekly report on initial jobless claims will most likely show that new filings for unemployment insurance totaled 265,000 last week, the same as the prior week and still indicative of a strong US labor market. Economists focus on consistent readings above 300,000 and rising as signs that stresses have begun to appear in the labor market; a reading above 300,000 hasn't been seen in over a year.
  • March Jobs Report (Fri.): Economists expect the U.S. economy added 210,000 jobs in March, down from the 242,000 added in February but another month in which the U.S. labor market continues to be a pillar of strength in the economy. The unemployment rate is expected to hold steady at 4.9%, a postcrisis low, while average hourly earnings should rise 0.3% over the prior month and 2.2% over last year. US Auto Sales, March (Fri.): All day Friday carmakers will report sales for March. Expectations are that the pace of sales accelerated to an annualized rate of 17.5 million in March after February's 17.4 million pace. Car sales have underpinned perhaps the strongest argument that while certain economic indicators may be lackluster, the U.S. consumer still has an appetite and the confidence to spend. Alternatively, increasing concerns have been raised about lending practices in the U.S. auto industry in recent months.
  • ISM manufacturing PMI (Fri.): Friday will also see the release of the Institute for Supply Management's latest purchasing managers' index, which should hit 50.7 after last month's reading of 49.5 indicated outright contraction in the sector during February.
  • University of Michigan Consumer Confidence (Fri.): The final reading on consumer confidence in March from the University of Michigan should show a slight uptick from the preliminary reading out two weeks ago. Friday's reading should hit 90.5, up slightly from 90.0 seen in the preliminary report, which was a five-month low.

Author: Kirsten Hamling