Since the end of the harsh winter weather in mid-March, most economic indicators haven't given a very strong read on where the economy is or where its headed. On one hand, initial claims data have hit all time lows when adjusted for population growth, capacity utilization has returned to pre-recession levels, new home prices have hit an all-time high, consumer confidence seems strong and we've seen strong manufacturing data. On the other hand, total new home sales disappointed and have missed on three of four reports, total payrolls are still depressed, and the flash PMI services figure for the US missed this morning, coming in at 54.2 versus 56.2 expected.
Especially in light of action in both the bond markets (flattening yield curve led by a strong rally in the long end) and equities (mixed action up and down with huge sell offs occurring in some sectors) of late, next week could really be make-or-break. If we get a series of strong data, expect a sharp reaction across financial markets. If we get consistent misses, the FOMC statement and post-meeting presser from Fed Chair Janet Yellen will become hugely important as the market could become desperate for a stall in the taper. And if we get mixed and confusing data? It's anyone's guess, but volatility will probably rear its head in a big way.
