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Durable goods orders, holidays – What to know in the week ahead

The holiday-shortened week will be relatively light in the way of economic data and corporate earnings results.

Markets will close early on Tuesday in observation of the Christmas Eve holiday. Equity markets will end trading at 1 p.m. ET, and credit markets will close at 2 p.m. ET. Both U.S. credit and equity markets will be closed Wednesday for Christmas Day.

A couple of new economic data releases detailing the state of the housing market and manufacturing sector will still capture investors’ attention.

On Monday, the Census Bureau will report its preliminary November durable goods report. Consensus economists expect that durable goods, or goods intended to last three years or more, rose at a 1.5% pace during the month, well above the 0.5% increase in October.

The report comes a week after the Federal Reserve’s November industrial production report showed a rebound in growth after an October decline. The stark improvement was driven in large part by a return to work by tens of thousands of auto workers at General Motors (GM), who had been on strike between September and October. But even stripping out autos, industrial production still rose month on month during November, pointing to an at least temporary underlying firming in the manufacturing sector after weakness earlier this year.

A Christmas tree is seen on Wall St. outside the New York Stock Exchange (NYSE) in New York, U.S., December 17, 2019. REUTERS/Brendan McDermid

In the durable goods report, “Motor vehicles and parts orders declined 2% in October, following a 2.9% decline the month prior,” Wells Fargo economists wrote in a note Friday. “By our calculations, a full rebound in orders for this category would add a little more than a percentage point to the headline figure.”

Many economists, however, have said that Boeing’s (BA) recent announcement to halt production of the 737 Max aircraft will drag on incoming economic data and outstrip any rebound in the manufacturing sector coming after the GM strike. Others have maintained that business fixed investment on the whole remains weak, continuing a downtrend seen during each of the past two quarters and creating a drag for manufacturers.

Core capital goods orders and shipments are each expected to have decelerated in November to underscore ongoing softness in business investment. Consensus economists expect core capital goods orders, or non-defense orders excluding aircraft, rose 0.2% in November after a 1.1% increase in October. Core capital goods shipments are expected to be flat.

“Core capital goods shipments rose strongly by 0.8% in October, but we expect an unchanged print for November,” Credit Suisse economist James Sweeney wrote in a note. “Low profits and still sluggish business sentiment are likely to keep business capex limited.”

New-home sales

Meanwhile, Monday will also bring data on November new-home sales from the Census Bureau. While low interest rates have helped support buyers and builders in the second half of the year, a shortage of affordable homes has kept some potential purchasers on the sidelines. During the month, existing home sales fell by 1.7%.

Consensus economists expect new home sales likely edged lower for a second consecutive month to a seasonally adjusted annual rate of 730,000. But individually, some economists have been more optimistic.

“For the first time in a few years it appears the housing market has the wind at its back, and we expect these dynamics will support continued improvement in the housing market going into 2020,” Wells Fargo analysts said in a note.

“As for the penultimate month of the decade, existing home sales took a step back, but surging builder optimism suggests to us that the pace of new home sales increased marginally in November,” they added.

Economic calendar

Monday: Durable goods orders, November preliminary (1.5% expected, 0.5% prior); Chicago Fed National Activity Index, November (-0.13 expected, -0.71 prior); New home sales, November (730,000 expected, 733,000 prior)

Tuesday: Richmond Fed Manufacturing Index, December (1 expected, -1 prior)

Wednesday: N/A

Thursday: MBA Mortgage Applications, week ended December 20 (-5.0% prior); Initial jobless claims, week ended December 21 (224,000 expected, 234,000 prior); Continuing claims, week ended December 21 (1/722 million prior)

Friday: N/A

Earnings calendar

No major corporate earnings report scheduled Dec. 23-27.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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