Not so hot, friends and countrymen, not so hot at all.
This morning’s reports on consumer prices and inflation-adjusted earnings, what they call “real” earnings, were both broadly flat, and when flat is not what you’re looking for, not what you’re looking for at all, that’s not a very good thing.
Consumer prices excluding food and energy, the s0-called core prices that get so much derision when everybody thinks the government’s trying to mask inflation by excluding those two categories, were flat, the Bureau of Labor Statistics reported. On a yearly basis, prices were up 0.9%. When you consider, too, that the Fed kept its fed funds interest rate at zero that whole time, then those numbers are very precarious indeed.
The news on wages wasn’t any better. Average hourly wages were flat in August compared to July, and up 0.5% compared to a year ago. If you think a 0.5% raise over a year is enough to cover all the necessities of life, then God bless you.
What these two reports show is an economy that is basically stagnant, with a not-insignificant chance of getting worse. Wages aren’t growing, prices aren’t rising, and all that ties back to the fact that everybody is still in the middle of this great unwind, this broad deleveraging of debts. We aren’t going anywhere. Indeed, even a cursory glance at the news over the past day or two tells you we’re going backward: a Census Bureau report shows that wages fell over the past decade, while the bureau also reported that now one in seven Americans, 43 million people, are living in poverty.
US stock futures down slightly premarket, following some weakness in European markets and in the euro. The single currency floating
around its overnight lows now, dancing above and below the $1.28 level.
A bit of decent news on the economic front this morning. Consumer prices rose for the first time in four months on the back of higher energy prices. But underlying inflation remains tame. CPI rose 0.3% in July from a month earlier, in line with economists expectations. And core consumer prices, which strip out changes in energy and food prices, rose by just 0.1%.
U.S. retail sales also rose for the first time in three months, increasing 0.4% in July from a month earlier. The gain, which was in line with expectations, was fueled by cars and gas. A positive number is definitely a bright spot, especially considering the past few months of declines, but there were only four increases among the 12 retail categories, representing some cause for concern.
Not exactly robust numbers, but definitely better readings than the slew of poor economic numbers we’ve seen over the last few weeks.
Additionally, Reuters/Univ of Michigan’s first look at August consumer sentiment due at 9:55am ET; and May business inventories at 10:00am.
Oil’s stabilized just below $76/barrel, gold a little lower. S&P futures down 2.70; 10-yr note higher, yield at 2.71%.
Good conversation between myself, Simon Constable and Bob O’Brien on today’s News Hub about what if anything the government could do should the economy actually start rolling over. While I didn’t mention in this conversation, it’s worth asking if the federales should do anything. The positive effects of the stimulus are debatable, the negative effects we still don’t know about, and it’s quite possible that everything they’ve done has just delayed the inevitable
US stocks rise on a late spurt, as the euro held its ground as well, despite some disconcerting economic reports this morning.
DJIA adds 25 (0.2%) to 10434, S&P 500 gains 1 to 1116, Nasdaq Comp inches ahead 1 to 2307. NYSE volume’s weak. Declining volume slightly higher than advancing. Stocks had fallen relatively sharply this morning, but the euro’s continued ride above $1.23 provides a lot of cover for the risk trade. Still, don’t take stocks as the perfect barometer of the moment: the 10-year Treasury was up sharply, with its yield falling to 3.19%, and gold rose to another record close.
This morning provided a bad mix of economic reports, even if stocks ignored them at the closing bell. Consumer prices fall for a second month, and jobless claims rise over the 470,000 mark, suggesting little to no job growth. Along with a big slide in the Philly Fed index, and a disappointing reading from the Conference Board, it paints a picture of an economy that’s threatening to stall.
Meanwhile, BP’s Tony Hayward gets day-long grilling in front of Congress, which is absolutely treating him like a pinata (to mix metaphors.) He should’ve just offered to swim in his company’s oil slick.
Get back in there and keep blowing that bubble! Don't let that thing deflate!
A mighty fine gumbo of data we’ve gotten this morning, folks. Even the stock market seems to be taking notice of the bad news, something it’s been ignoring lately, and the cover fire that the euro’s been laying down isn’t helping (so far, at least.)
Taken together, this morning’s reports — consumer prices, weekly jobless claims, the Philly Fed index and the Conference Board’s leading economic indicators report — paint a picture of an economy that has at least plateaued, and is in danger of rolling over into the dread double-dip. That isn’t what you want to see at this point in the recovery.
Look, some pull back shouldn’t be unexpected. It was silly to think the jobs market would move in a straight line of improvement, and as that’s probably the single-most important factor in the economy, it was silly to think we’d have an easy, V-shaped recovery. The fear, though, is that with Europe still on edge, with people still not spending money, with jobs still not being created, that we risk falling right back into the soup.
Consumer prices fell in May from the previous month, the second month in a row, albeit the so-called “core” rate was marginally higher. Now, there’s a word for a condition where prices are falling, as opposed to rising. Oh, what’s that word again? Deflation. Yes, that’s it. Think Ben Bernanke noticed? You bet he did.
Now that BP’s paid its pound of flesh, well, 20 billion pounds, is the worst over for the energy sector? We discuss that, as well as Spain’s bond auction and this morning’s data, on today’s Markets Hub.
Ben Bernanke’s not keeping rates low because the economy’s firing on all cylinders, folks. And maybe Jamie Dimon is optimistic about the economy, you would be too if the Fed was tailoring the economy toward your profitability, but there are some red flags out there (they’re just being lost amid the sea of red, white and blue ones.)
- A total of 130 companies in S&P 500, or 26% of the index, hit 52-week highs yesterday, while no companies hit fresh lows, Bespoke says. “While net new highs had been struggling to expand in recent months, today’s reading marks a new bull market high.”
- Sirius XM (SIRI) gets a delisting notice from Nasdaq. “An ominous threat, but one not likely to be carried out,” Digital Daily blogger John Paczkowski says, noting Sirius is appealing the notice and seeking an extension from Nasdaq. “Frankly, with over 3.7 billion shares outstanding, there’s little reason to fear Sirius will be booted from Nasdaq.”
- Can’t sugarcoat it: The aughts were awful. Atlanta Fed’s macroblog looks at trough-to-trough periods based on real GDP growth, and determines 2002-09 period was one of the worst since 1930s. “No other previous period comes close.”
- What exactly does the VIX tell us? FT Alphaville weighs in on the debate.
- Weekly jobless claims and consumer prices data suggest “the heavy lifting of rebuilding the economy is upon us,” James Picerno says.
- “Congress did not need to deregulate Wall Street – they only had to defund the SEC – which is what effectively happened,” Barry Ritholtz writes. “Hence, the chief cop on the Wall Street beat was outgunned, overmatched, undermanned and out-lawyered by the industry they were supposed to be regulating. How can that possibly have been any good for investors?”
- HTC has flimsy defense against Apple, John Paczkowski says. Its main argument: it’s been making smartphones longer than Apple. “While it’s certainly possible that might be the case, it’s hard to accept that argument without a list of patents to back it up. Harder still, when HTC says nothing about its legal strategy for dealing with Apple’s assault.”
- More bailed out banks failed to pay a quarterly dividend to the government in February. The number hit 82 last month, up from 55 in November 2009.
- Apple’s (AAPL) already pre-sold hundreds of thousands of iPads in anticipation of April’s official release, WSJ reports.
- First upset of the NCAA Tournament’s already in. No. 11 Old Dominion defeats No. 6 Notre Dame in the opening round.
A very worthwhile discussion today about what this morning’s data are telling us, what the Greeks are telling us, and what FedEx is telling us, even if the bulls didn’t seem to hear it.
I'm glad the price hasn't gone up, but I still don't have a job.
Weekly jobless claims eased 5,000, slightly less than the boys on the Street expected, but at a total of 457,000, still at an elevated level that doesn’t suggest the monthly numbers are going to rise soon. Even more disturbing, the numbers for emergency compensation jumped again, up 360,000 to 5.9M.
That pushed total continuing claims to 11.6M, a fresh record, and a number that highlights once again, painfully, that employers are not hiring, despite the fact that some observers (and you know who you are) think all those folks on the dole are just sitting around waiting for their bennies to run out.
Then there’s consumer prices, which were flat in February, and up only 2.1% on the year. When you think about how much money the Fed’s been pumping into the system, to have this number flat is not a good sign. Where would we be if the Fed hadn’t put a trillion plus into the game? We’re thinking of a word here, begins with a “d.” What is it again?
“February’s US consumer prices figures show there is next to no inflationary pressure in the US economy,” Capital Economics’ Paul Dales writes. “Deflation may yet emerge as the real risk.”
That’s it!
And, despite the fact that there are no inflationary pressures whatsoever, wages are still sliding. BLS reported real average weekly earnings fell 0.2%, as a decline in the workweek offset a slight rise in hourly wages. Real wages have been flat for six months now.
So, to sum up, nobody’s hiring, more people than ever are collecting, prices aren’t moving, wages are sliding for those who do have jobs. Oh, and the DJIA is at a nearly 18-month high.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]
