The FOMC Meeting Will Dominate the Week for Investors

The FOMC looms large this week

This week will have some important economic data with housing starts, building permits, industrial production, and capacity utilization. That said, the most important event this week will be the FOMC meeting, which will happen on Tuesday and Wednesday. This is the first meeting where rate hikes are on the table. We’ll see if the data has been strong enough to get the Fed to raise rates. Most strategists seem to be thinking that the weak Q1 will probably keep the Fed on the sidelines at this meeting. The Fed will also update its forecasts for unemployment, GDP growth, and inflation.

The FOMC Meeting Will Dominate the Week for Investors

Economic data this week

Let’s look at a rundown of this week’s economic data.

Monday, June 15, 2015:

  • Empire Manufacturing
  • industrial production
  • capacity utilization
  • manufacturing production
  • NAHB Housing Market Index
  • TIC flows

Tuesday, June 16, 2015:

  • housing starts
  • building permits

Wednesday, June 17, 2015:

  • MBA (Mortgage Bankers Association) mortgage applications
  • FOMC rate decision

Thursday, June 18, 2015:

  • initial jobless claims
  • Bloomberg Consumer Comfort Index
  • consumer price index
  • real average weekly earnings
  • Philly Fed
  • Index of leading economic indicators

Friday, June 19, 2015:

  • no data

Earnings reports this week

Friday, June 19, 2015:

  • KB Home (KBH)

Impact on mortgage REITs

REITs such as MFA Financial (MFA) and American Capital Agency (AGNC) are going to focus on the FOMC. Interest rates, as measured by the iShares 20+ Year Treasury Bond ETF (TLT), have been rising dramatically over the past two months as deflation fears in Europe recede. The big question about interest rates, at least for REITs, is the shape of the yield curve. The last time the Fed started increasing rates, the yield curve flattened and even inverted. For REITs, this means their MBS holdings won’t suffer the mark-to-market hits they would suffer if the yield curve did a parallel shift upward.

Impact on homebuilders

Builders like Lennar (LEN) and PulteGroup (PHM) will focus on housing starts and building permits, the NAHB Housing Market Index, and earnings out of KB Home. The FOMC meeting will also matter, but builders are more levered to economic strength and weakness than they are to interest rates.