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The Week Ahead: Bank Earnings and Housing Starts

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Lots of important housing-related data this week

Investors will have a lot of data to chew through this week as we get some important housing data and second quarter earnings season begins in earnest. Earnings this week will be dominated by the big banks, including J.P Morgan (JPM), Citigroup (C), and Wells Fargo (WFC). Judging by the Mortgage Bankers Mortgage Applications Index, which dropped by 16% during the quarter, mortgage origination numbers may disappoint.

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We have some critical economic data this week, starting with retail sales on Tuesday. Consumption has been a bit of a weak link in the economy (along with housing) and investors as well as the Fed will be looking to see if there’s an uptick here. So far, gasoline savings haven’t translated into more spending at the mall.

Homebuilders, as measured by the S&P SPDR Homebuilder ETF (XHB), will have a lot of data to analyze between the NAHB Housing Market index and housing starts and building permits. For the economy to make the leap to the next level of recovery, housing starts have to return at least to what was considered “normalcy” before the bubble days, which was starts of around 1.5 million a year. Wall Street is forecasting an annualized rate of 1.1 million for June.

Finally, we’ll see the endgame with the Greek situation. Bonds sold off late last week as Greece appeared to have made enough concessions to get the European Union on board. It looks like the European Union is going to give Greece 72 hours to actually pass legislation implementing the reforms. Bonds will be buffeted by developments there.

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Economic data this week

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

Monday, July 13, 2015:

  • monthly budget statement

Tuesday, July 14, 2015:

  • retail sales
  • import prices
  • NFIB Small Busines Optimimsm
  • business inventories

Wednesday, July 15, 2015:

  • MBA (Mortgage Bankers Association) mortgage applications
  • producer price index
  • Empire Manufacturing
  • manufacturing production
  • industrial production
  • capacity utilization
  • Fed Beige Book

Thursday, July 16, 2015:

  • initial jobless claims
  • Bloomberg Consumer Comfort Index
  • Philly Fed
  • NAHB Housing Market Index
  • TIC flows

Friday, July 17, 2015:

  • housing starts
  • building permits
  • consumer price index
  • University of Michigan consumer sentiment
  • real average weekly earnings

Earnings reports

There will be no real estate–related earnings released this week.

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Impact on mortgage REITs

REITs such as MFA Financial (MFA) and American Capital Agency (AGNC) will focus on data that will move the bond market. For them, it will be all about Greece. We’ll get some inflation data this week, but given the meltdown in China, inflation is probably about to become a back-burner issue. That said, the real weekly wages number will be important. Investors who want to bet on interest rates should look at the iShares 20-year bond fund (TLT).

Impact on homebuilders

Builders such as D.R. Horton (DHI) and PulteGroup (PHM) will focus on the NAHB numbers and housing starts. Earnings season has already begun, and Lennar (LEN) posted good numbers.

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