Get Ready For A Week Of Economic Fireworks - Here's Your Complete Preview

It's a four-day week ahead of the July 4 weekend.

But it would be a mistake to just phone it in. We've got some economic fireworks on the calendar including a slew of manufacturing reports and a Thursday jobs report.

Here's your Monday Scouting Report:

Top Story

• Forget About Q1: No one will dispute that last week's GDP report was ugly.
  
  But that's the past. And more importantly, the present and future are looking increasingly rosy.
  
  Here's Renaissance Macro's Neil Dutta: "If GDP were truly so weak, we would not expect aggregate hours worked to climb 3.7% annualized through May, jobless claims to remain near cycle lows, consumer confidence to hit a cycle high, industrial production to climb 5.0% at an annual rate over the first five months of the year, core capital goods orders to be up 5.8%, ISM to be above 55, and vehicle sales to hit their strongest annualized selling pace for the year. GDP is the outlier in these data points. I will roll my eyes and move on. Most of the data we just mentioned is consistent with underlying growth over 3.0%."

Economic Calendar

• Chicago Purchasing Managers Index (Mon): Economists estimate this regional activity index fell to 63.0 in June from 65.5. "While this would be a modest decline, the underlying fundamentals suggest that the solid trends in manufacturing activity growth continued in June, as the highly correlated Philadelphia Fed and Empire State indices demonstrated in the month following unusually harsh winter weather in the first quarter," said Barclays economists.
• Pending Home Sales (Mon): Economists estimate sales climbed 1.2% in May. "New home sales jumped higher in May while mortgage purchase applications edged up," noted Bank of America Merrill Lynch economists. "The combination of the increase in supply of existing homes and lower mortgage rates should support sales of existing properties."
• Dallas Fed Manufacturing Activity (Mon): Economists estimate this regional index climbed to 10.0 in June from 8.0 in May.
• Markit US Manufacturing PMI (Tues): The flash, or preliminary, print was 57.5, up from 56.4 in May. "US industry is booming again, with the flash manufacturing PMI hitting its highest for just over four years in June," said Markit's Chris Williamson after that initial report. "The strong reading also rounds off the best quarter for factories for four years, adding to indications that the US economy rebounded strongly in the second quarter from the weather-related weakness seen at the start of the year."
• ISM Manufacturing (Tues): Economists estimate this activity index climbed to 55.8 in June from 55.4 in May. "Early June PMI readings have been generally positive, including 4-year highs in the Markit Flash PMI and Empire Fed Index, and a 10-month high in the Philly Fed Index," said Credit Suisse economists. "The ISM New Orders seasonal factor is also the most generous June factor in ten years."
• Construction Spending (Tues): Economists estimate spending climbed by 0.5% in May. "Weakness in housing starts in May points to sluggish homebuilding activity, but residential spending should be boosted by a rebound in the volatile home improvements category, and we look for modest upside in private nonresidential and government spending," said Morgan Stanley's Ted Wieseman.
• Vehicle Sales (Tues): Analysts estimate June sales slipped to an annualized rate of 16.4 million, down from 16.7 in May. Citi's Peter D'Antonio offers some good perspective: "Although motor vehicle sales likely fell back from the extremely rapid May pace, sales probably remained elevated in June. Even with our forecast drop, the second quarter would show a nearly 20% annualized increase in sales from the weather-battered first quarter. Note 1: Motor vehicle sales will give an early view of consumer activity for the entire second quarter. Our baseline forecast is for a resurgent consumer, and autos appear to be confirming this view. Note 2: The buffeting effects of severe weather have obscured the trend in auto sales for at least the past six-months. June may offer a relatively clean reading, which could help us gauge the condition of the new vehicle market."
• ADP Employment Change (Wed): Economists estimate private companies added 205,000 payrolls in June. "Other various labor market indicators such as initial jobless claims and the regional manufacturing surveys suggest another trend-like month for payroll growth," said BofA Merrill Lynch economists. "Relative to BLS data, ADP private payrolls have been growing at a slower pace over the last four months - the only out-of-sample data points in the time series."
• Factory Orders (Wed): Economists estimate orders fell 0.2% in May. "The durable goods report showed a 1.0% drop on durable goods in the month, with significant negative contributions from the volatile defense and aircraft components, although we expect this to be offset somewhat by a broadly flat reading on nondurable orders," said Barclays economists.
• Trade Balance (Thurs): Economists estimate the trade deficit shrunk to $45 billion in May from $47.2 billion the month prior. "The ISM import index fell below back below the new export orders index, which intimates that the deficit came back down in the month," note Wells Fargo's John Silvia.
• Initial Jobless Claims (Thurs): Economists estimate claims ... from 312,000 last week. "Initial jobless claims continue to linger below 320k," said Nomura economists. "This suggests that layoffs have bottomed out and that more hiring will be needed to spur job growth."
• The Jobs Report (Thurs): Economists estimate U.S. companies added 215,000 nonfarm payrolls, including 210,000 private payrolls. The unemployment rate is expected to be unchanged at 6.3%. Average hourly earnings are expected to have climbed by 0.2% month-over-month. From Morgan Stanley's Wieseman: "We look for payrolls to post a gain in line with the year-to-date average, which has accelerated a bit from last year, as jobless claims continue to point to a very low pace of firings, while recent indications point to some improvement in the hiring rate. The 4-week average of initial claims fell to a seven-year low of 310,500 in the last week of May and was running at a low 311,750 in the week of June 14, consistent with an unusually low pace of firings and layoffs. Meanwhile, on the other side of gross job flows, recent indications point to some improvement in sluggish hiring rates. The Manpower employment outlook survey reached a six-year high for the Q3 hiring outlook, and job openings in the JOLTS surged to a seven-year high in April."
• Markit US Services PMI (Thurs): Economists expect Markit's final June services PMI will print at 60.9, down from the preliminary reading of 61.2, but up from 58.1 in May. "Business activity in the US service sector surged higher in June," said Markit's Williamson. "A record high in the services PMI follows news from the flash manufacturing PMI that factory output grew in June at the fastest rate for just over four years. Combined, the two PMI surveys indicate that business activity is growing at the strongest rate seen since prior to the financial crisis."
• ISM Non-Manufacturing (Thurs): Economists estimate that this services index was unchanged at 56.3 in June. "The ISM non-manufacturing index probably remained elevated in June, consistent with our economic forecast for a sharp bounce back in growth in the second quarter," said Citi's D'Antonio. "The regional and national purchasing managers' surveys have been running at a feverish pace, offering support for this view."

Market Commentary

At 1,960, the S&P 500 is just 2 points from an all-time closing high and 8 points from an all-time intraday high. Especially in the wake of last week's horrific GDP report, what gives?

"The rally in stocks in the face of an appalling US GDP print again emphasizes the importance of future expectations vs. past facts," said JP Morgan's Jan Loeys. "On the economy, there is strong agreement that growth is picking up from this year's appallingly weak start to just over 3% over the next six quarters and that global inflation is set to rise about 0.3% over 2013-15. Most investors we see think risk on growth is biased to the upside. There is little interest in discussing or protecting against secular stagnation or stagflation."

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