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Tuesday, September 26, 2017

Looking for economic data? You’ve come to the right week. Only trouble is, most of it is coming out after the opening bell today and beyond — which means, by definition, after the Ahead of Wall Street column is published. August New Home Sales and September Consumer Confidence reports come out at 10am ET. Also, Fed Chair Janet Yellen speaks this afternoon, as do other Fed players — specifically Lael Brainard, Loretta Mester and Raphael Bostic. After today’s closing bell, we will see fiscal Q1 2018 earnings results from Nike (NKE - Free Report) .

Ahead of today’s start to normal-day trading, the Case-Shiller Home Price Index report came in slightly better than expected: 5.9% versus 5.7% for the month of July. Yes, this data is from the middle of summer, but is considered to be the most accurate of all metrics regarding U.S. home pricing. This is something the Fed should be happy to see — that real estate price growth is higher than analysts were anticipating — because this lends itself to increased inflation, which will help the Fed (finally) see its 2% goal. Even if this takes longer than expected, increased home pricing is better than a decrease.

The other side of the Fed’s dual mandate, apart from 2% inflation, is job growth. This has been solid for the past year and even previously. What has puzzled economists is the lack of wage growth, and on this issue, a new report released by The Hamilton Project, headed by a Brookings Institute fellow, indicates we have seen 0.2% wage growth over the past year. This report, which looks at more than four decades’ worth of data, tracks how productivity and wage growth has decoupled.

From 1947 through roughly 1977, wage growth and productivity were in-line with one another. By the late 1990s, productivity had zoomed past wage growth. It flattened during the Great Recession in the last decade, and has been up only gradually ever since. But productivity is still far above wage growth in 2017.

Companies like Target (TGT - Free Report) independently raising its minimum wage — reported on here by Zacks’ Maddy Johnson — should help a bit, but only if all other retailers, restaurants, etc. follow suit. One company is not enough to create wage growth pressure, which is exactly what is needed for that inflation metric to hit the Fed’s goals.

As mentioned above, we expect some interesting statements from Fed Chair Yellen and other members of the Federal Reserve today. Perhaps markets will take direction from these statements later today and for the rest of the week.

Equifax (EFX - Free Report) CEO Richard Smith is stepping down from his post effective today, a couple weeks after news that 143 million Americans’ data has been compromised by a breach at the company. The stock has fallen precipitously since this news report, and looks to open lower again today.

Finally, Carnival Cruise Lines (CCL - Free Report) has beaten earnings estimates for at least the fifth consecutive quarter, topping fiscal Q3 2017 estimates by 9 cents per share and coming out ahead of revenue estimates as well. The company did report it expects hurricane and damages in the Caribbean to have a negative effect on Q4 results, but shares are trading up in today’s pre-market.

Mark Vickery
Senior Editor

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