March 7, 2011

Taxes and Fed Nominees; Galleon, SEC Budget and Oil: Advisor Briefing for the Week of March 7, 2011

Congress hits its stride this week with hearings on everything from reforming the tax code and the SEC’s 2012 budget to grilling nominees for a Fed governorship and White House economic posts, while the markets will continue to watch the situation in Libya and the Mideast (on a Sunday talk show, White House Chief of Staff William Daley said the Administration was “considering” tapping the strategic oil reserve to help ease gas prices).

Signs of the state of the economy that will likely move the markets this week include the trade deficit (complemented by a Senate Finance Committee hearing on Obama trade policy), consumer credit on Monday and consumer sentiment and business inventories at week’s end. What will draw much ink and many advisors’ interest is the testimony on Tuesday of Raj Rajaratnam, founder of Galleon Group, on insider trading charges.

On Monday, March 7, economic reports include the Federal Reserve’s report on the state of consumer credit in January. The American Society of Pension Professionals & Actuaries (ASPPA) begins day one of its two-day 401(k) summit in Las Vegas (look for onsite reporting from Investment Advisor editor John Sullivan).

On Tuesday, March 8, the NYSE and Nasdaq report short-selling positions, while Galleon hedge fund founder Raj Rajaratnam is unlikely to be celebrating Mardi Gras as he instead appears in a federal court in Manhattan, where he will eventually take the stand in his own defense in his insider trading case. Lloyd Blankfein of Goldman Sachs may also testify in the trial, which is expected to last six to eight weeks. The Senate Banking Committee advises and perhaps consents to Federal Reserve Board Governor nominee Peter Diamond, and Katherine Abraham and Carl Shapiro, nominees for President Obama’s Council of Economic Advisers. The Senate Finance Committee continues its hearings on reforming the tax code, this week focusing on whether the tax system supports economic growth and job creation (see Danielle Andrus’ report on the intitial hearing last week). In London, the Bank of England concludes a two-day policy meeting, while Treasury Secretary Tim Geithner travels to Germany for talks.

On Wednesday, March 9, the two-year anniversary of the nadir of the stock market’s financial crisis swoon, we hear results of the monthly Mortgage Bankers Association (MBA) survey on new mortgage applications, along with wholesale trade inventories for January and the Energy Information Administration (EIA) weekly Petroleum Status Report. The Senate Finance Committee holds hearings on the Administration’s trade agenda, and the Senate Banking Committee holds a hearing on the state of the housing market.

Following the good news on job creation and unemployment from last Friday, Thursday, March 10, brings weekly new unemployment insurance claims (they fell sharply last week). Other economic reports include the U.S. international trade deficit for January and the Treasury’s assessment of the U.S. budget deficit for February.

The Senate Banking Committee holds a hearing on “Oversight of the Securities and Exchange Commission’s Operations, Activities, Challenges and FY 2012 Budget Request” at 10:00 AM in Washington, while across the Potomac, in Arlington, Va., the Investment Adviser Association (IAA) kicks off its annual compliance conference (look for onsite reporting on Friday from yours truly).

On Friday, March 11, we get two measures of consumers’ feelings and actions: the Commerce Dept. reports on retail sales for February (consensus is for a 1.2% increase following the lackluster 0.3% rise in January) and the University of Michigan/Reuters consumer sentiment index, along with business inventories for January. Overseas, China releases its consumer and producer price indexes for February, while eurozone leaders meet in preparation for a zone-wide response to the debt crisis.

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