Market Call: More Churning?

We've been expecting the stock market to churn for a while. We didn't expect it would churn so much in just one week as it did last week. So now what? Our bet is probably more churning is ahead with lots of volatility through the presidential election.

The week ahead is jampacked with economic indicators that are likely to show that retail sales and industrial production weakened during July, as expected since employment was weak during the month. The week's inflation indicators might show that it edged higher during July, as widely expected. As a result, Fed officials might push back against market expectations that September's FFR cut might be more than 25bps, especially if they agree with us that bad weather depressed the economy and employment last month. That view should be confirmed by another downtick in Thursday's jobless insurance claims report.