10:00 a.m. ISM Mfg Index The Institute for Supply Management surveys nearly 400 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where reading above (below) 50 percent indicate an expanding (contracting) factory sector. Export orders, import orders, backlog orders and prices paid for raw and unfinished materials are also measured, but these are not included in the overall index. Why Investors Care? Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provides insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report that helps it to determine the direction of interest rates when inflation signals are flashing in these data. As a result, the bond market is highly sensitive to this report.

8:30 a.m. Employment Situation The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. Why Investors Care? If ever there was an economic report that can move the markets, this is it. The anticipation on Wall Street each month is palpable, the reactions are dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report. The employment data gives the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest. The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus. By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.

10:00 a.m. Factory Orders Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month. Why Investors Care? Investors want to keep their fingers on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth, which is less likely to cause inflationary pressures. by tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios. The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysis monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production. All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments.

10:00 a.m. ISM Non-Manufacturing Survey The non-manufacturing ISM survey shows nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. Financial market players monitor the business activity index, because a composite index, like its manufacturing cousin, in not compiled by the ISM. Why Investors Care? Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data like the ISM non-manufacturing surveys business activity index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The ISM manufacturing index has a long history  dating back to the 1940s. This new report (beginning in 1998) was originally not adjusted for seasonal variation, but the ISM has since established seasonally adjusted figures for several of the ISM non-manufacturing components (including the business activity index) since 2002. As result, the ISM non-manufacturing survey has garnered more attention and is almost as widely followed by financial market participants as its manufacturing cousin.

10:00 a.m. Pending Home Sales Index The National Association of Realtors developed the pending home sales index as a leading indicator of housing activity. As such, it is a leading indicator of existing home sales, not new home sales. A pending sale is one in which a contract was signed, but not yet closed. It usually takes four to six weeks to close a contracted sale. Why Investors Care? This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the pending home sales index, which measures home resales, investors, can gain specific investment ideas as well as broad guidance for managing a portfolio. Even though home resales don't always create new output, once the home is sold, it generates revenues for the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items homebuyers might purchase. The economic "ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home resales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of homebuilders, mortgage lenders and home furnishings companies.

8:30 a.m. Retail Sales Retail sales measure the total receipts at stores that sell durable and nondurable goods. Consumer spending accounts for two-thirds of GDP and is therefore a key element in economic growth. Why Investors Care? Consumer spending accounts for more than two-thirds of the economy, so if you know what consumers are up to, youll have a pretty good handle on where the economy is headed. Needless to say, thats a big advantage for investors. The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull markets of the 1990s. Retail sales growth did slow down in tandem with the equity market in 2000 and 2001, but then rebounded at a healthy pace between 2003 and 2005. Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a companys quarterly or annual report.

10:00 a.m. Business Inventories Business inventories are the dollar amount of inventories held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity. Why Investors Care? Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth that wont generate inflationary pressures. Rising inventories can be an indication of business optimism that sales will be growing in the coming months. By looking at the ratio of inventories to sales, investors can see whether production demands will expand or contract in the near future. For example, if inventory growth lags sales growth, then manufacturers will have to boost production lest commodity shortages occur. On the other hand, if unintended inventory accumulation occurs (that is, sales to do meet expectations), then production will probably have to slow while those inventories are worked down. In this manner, the business inventory data provide a valuable forward-looking tool for tracking the economy.

8:30 a.m. Consumer Price Index The Consumer Price Index is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation. Why Investors Care? The consumer price index is the most widely followed indicator of inflation in the United States. An individual investor who understands the process of inflation and how inflation influences the markets will no doubt benefit over those investors that do not understand the consequences of inflation. Inflation is an increase in the overall prices of goods and services. This relationship between inflation and interest rates is the key to understanding how data such as the CPI Influence the markets  and your investments. If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation, because you know that the $100 wont be able to buy the same amount of goods and services a year form now, as it does today. If you were in a country where prices double every couple of months, you might wan to charge 400% interest for a total payout of $500 at the end of the year. In the United States, the CPI tells us that prices were rising about 3 to 3.5 percent a year through the summer of 2005. Consequently, you would have to charge 3 to 3.5 percent interest simply to recoup your purchasing power within the next 12 months. You might want to add in one or two percentage points to cover default risk and the opportunity cost, but inflation remains the key variable in what interest rate you would charge. Inflation (along with default risk and opportunity cost) explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates accordingly. The effect ripples across stocks, bonds, commodities and your portfolio, often in a dramatic fashion. By tracking the trends of inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform.

9:15 a.m. Industrial Production The index of industrial production measures the physical output of the nations factories, mines and utilities. The industrial sector accounts for less than one-fifth of the economy but for most of its cyclical variation. The capacity utilization rate reflects the usage of available resources among factories, utilities and mines. A high and rising operating rate may signal that resources are being utilized to their fullest capacity  a warning sign of inflationary pressures. Why Investors Care? Investors want to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates into higher corporate profits. The bond market prefers more subdued growth that wont lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios. The index of industrial production shows how much factories, mines and utilities are producing. The manufacturing sector accounts for less than 20 percent of the economy, but most of its cyclical variation. Consequently, this report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not. The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate gets too high (above 85 percent) it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and sets interest rate policy on the basis of whether production constraints are threatening to cause inflationary pressures. As such, the bond market can be highly sensitive to changes in the capacity utilization rate. In this global environment, though, global capacity constraints may matter as much as domestic capacity constraints.

8:30 a.m. Housing Starts Housing starts measure initial construction of residential unties (single-family and multi-family) each month. A rising (falling) trend points to gains (declines) in demand for furniture, home furnishings and appliances. Why Investors Care? Two words. . . Ripple Effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data, such as housing starts, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Homebuilders usually dont start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the homebuilder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few of things new home buyers might spend money on, so the economic ripple effect can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds, and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of homebuilders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.

National Counsel of State Housing Agencies Spring Training Westin La Paloma Tucson, AZ NCHSA

National Counsel of State Housing Agencies Spring Training Westin La Paloma Tucson, AZ NCHSA

National Counsel of State Housing Agencies Spring Training Westin La Paloma Tucson, AZ NCHSA

10:00 a.m. Leading Indicators A composite index of ten economic indicators that should lead overall economic activity. This indicator was initially compiled by the Commerce Department but is not compiled and produced by The Conference Board. It has been revised many times in the past 30 years  particularly when it has not done a good job of predicting turning points. Why Investors Care? Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the index of leading indicators, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The index of leading indicators is designed to predict turning points in the economy  such as recessions and recoveries. More specifically, it was designed to lead the index of coincident indicators, also now published by The Conference Board. Investors like to see composite indexes because they tell an easy story, although they are not always as useful as they promise. The majority of the components of the leading indicators have been reported earlier in the month so that the composite index doesnt necessarily reveal new information about the economy. Bond investors tend to be less interested in this index than equity investors. Also, the non-financial media tends to give this index more press than it deserves.

National Counsel of State Housing Agencies Spring Training Westin La Paloma Tucson, AZ NCHSA