Market Talk

Anyone betting that manufacturing will continue to lead the US economic recovery might think twice after reading comments from survey respondents in Dallas Fed’s April Texas manufacturing outlook.

Similar to Philly Fed’s gauge last week, Dallas headline number tanked, to 8.1 from 24.1 in March. The Philly survey’s headline number fell to 18.5 from 43.4 in March, but unlike the Dallas survey, Philly doesn’t include respondent comments in its report.

Down in Texas there’s a fair measure of cautious optimism among survey respondents, and plenty of concern about high costs and soft demand. Here’s one from a plastics and rubber products manufacturer that sounds pretty good:

“We are very encouraged by the breadth of activity with our cross section of customers in the Dallas–Fort Worth area. It is not just a few companies with increased requirements for plastic parts, but pretty much all of our diverse customer base.”

Now here’s one from the other end of the spectrum, a furniture/related product manufacturer: “Our industry has hit another brick wall. Rapidly increasing costs and fuel costs have shocked the consumer away from any nonmandatory spending. They normally adjust, but it may take several months.” Continue reading…

Another directionless premarket setup for stocks, as investors prepare to digest a burst of economic data this morning.

January retail sales, import prices and NY Fed’s February Empire State manufacturing survey all due at 8:30am ET; December business inventories and homebuilders’ Feb sentiment index set for 10:00am. Cleveland Fed’s Pianalto also scheduled to speak about economic conditions around 10:00am.

Prediction: Any better-than-expected data helps stock rally, but anything that stinks gets dismissed as skewed by bad weather.

Dell reports results after the close. FedEx profit warning late yesterday gets shrugged off, as it seems everyone saw this one coming, what with all the bad weather and soaring fuel costs. FDX actually pointed higher premarket, the spin no doubt suggesting “it could’ve been worse.” Well, the weather may get better, but don’t hold your breath on those fuel prices, citizens.

Stocks in Europe mostly higher, euro is firmer, USD index off 0.3%.

S&P futures flat; 10-yr note lower, yield at 3.65%.

Deterioration in NY Fed’s November Empire State manufacturing survey was quite an eye-grabber, with the general business index tumbling below zero for the first time since July 2009. Interesting to see investors whistling past this report today.

Here’s a sample of the ugliness:

General business conditions reading plunged to -11.14 from 15.73 in October; new orders fell off a cliff, to -24.38 from 12.90; average workweek slides to -12.99 from 3.33.

Plunge in new orders was the sharpest drop since September 2001, NY Fed says.

On the bright side, manufacturers expect things to get better, with the future general business conditions index climbing. Chalk that up to Republicans taking back the House. We’ll see how long the optimism lasts.

Capital Economics calls the weak report “worrying given that all the surveys had suggested industry was emerging from its summer soft patch.” Still, firm says Empire State survey “is very volatile, so it is far too early to conclude that industry is heading back into recession. But with the upward impetus from the surge in world trade, the release of pent-up investment demand and inventory rebuilding fading, industrial growth will remain subdued.”

Philly Fed dishes up its November business report on Thursday.

Premarket US stock futures suggest a flat to slightly higher open when regular trading gets underway. European markets are gaining, oil and gold both rallying with the US dollar index roughly flat. It’s a short week loaded with economic data.

NY Fed’s February Empire State manufacturing survey out at 8:30 a.m. showed activity jumped sharply in the region, with the business conditions index jumping to 24.91 from 15.92. Elsewhere today, home builders’ February sentiment index at 1:00pm ET. Other key data this week include housing starts, industrial production, PPI, CPI and Philly Fed Feb manufacturing survey.

S&P futures up 4.90, DJ futures up 33. Ten-year a little lower, yield at 3.71%.

Euro’s up on the dollar, after eurozone ministers say they’re “giving” Greece a month to get its house in order. They may say “giving,” we read it as “begging.”