Posted by Paul Vignaon March 22, 2011 Markets /
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I found an interesting contrast between this outlook, from Ed Yardeni, president of Yardeni Research, and this one from Peter Morici. What I find interesting is the divergence; two guys who from my reading of them are both in the conservative camp, but with wildly different takes on what’s going on.
I don’t know that I have some brilliant insight into what all this means. I just found it very interesting, and seeing as this is Market Talk, well, here’s some talk.
From Yardeni:
What’s driving the global economy? For the past two years, it has been the boom in global manufacturing, led by demand for manufactured goods in emerging economies. The OECD index of global industrial production rose 0.9% m/m and 6.9% y/y during December to a new record high. It is up 15.3% since the most recent cyclical trough during January 2009. It had plunged 12.2% during the most recent downturn.
It should continue to grow this year. There are certainly challenges confronting global manufacturing. High food and fuel prices may depress the purchasing power of consumers around the world. Concerns about rising inflation are pushing central banks to tighten their monetary policies, particularly in emerging economies. Serious disruptions to global supply lines are already an issue for the auto and technology industries. It is difficult to assess how long these problems will persist.
Dallas Fed’s January Texas Manufacturing Outlook survey showed a notable drop in its general business activity index, to 10.9 from 15.8. Ten of 15 monthly indicators fell in January vs December.
The production indicator collapsed more than 15 points to just 0.2, while capacity utilization fell to 4.1 from 18.8. Of the five indicators that increased, the two biggest jumps were in prices paid for raw materials (spike to 62 from 43) and prices received for finished goods (to 19.4 from 11.9).
And the Dallas Fed’s key takeaway: “Texas factory activity held steady” in January.
Held “steady”? They must be redefining the term, because last we checked, the word meant “firmly fixed or stable”; “Not changing movement, direction or quality.” There’s nothing “steady” about this report, citizens. Feel free to take a look for yourselves.
The implications for inflation expectations look particularly unsteady. “Sixty percent of respondents anticipate further increases in raw materials prices over the next six months, while 40 percent expect higher finished goods prices,” the report says.
Addendum: Don’t miss the last two pages of the report, with comments from businesses on their hiring plans. Here’s a little taste from a commenter in food manufacturing:
We need significantly more business to justify hiring additional people. In this uncertain economy and with little peace of mind about what regulations or policies might be implemented…we will not hire anyone until we absolutely need them.
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.
So the stock market is starting off October in mainly the same manner it handled September, by rising. But this morning’s quick jump higher has run into some resistance. I’ll tell you, this is the real danger of doing these videos: when we started, the Dow was up about 70. When I got back to my desk, the Dow was negative. So, yes, we’re essentially on a one-way street, but that’s not to say there aren’t any potholes, and that not to say it won’t change direction, maybe quickly.
It’s up now, but again, there’s some push back. Part of it is technical resistance: the S&P 500′s intraday high is 1150.30, and that’s a key resistance level. The other is fundamental. We went over the income report. The ISM’s manufacturing index wasn’t so hot either. Sure, it beat “expectations,” but it did slow from a month ago, and the sub-indexes were red flags: new orders fell, inventories rose.
US stocks kick off August on a bright note, surging from the opening bell and never looking back, as better-than-expected manufacturing and construction spending data fueled the run-up.
Strong quarterly reports from European banks ignite the rally, with major indexes closing near session highs. DJIA closes up 208, or 2%, to 10674 and S&P 500 rises 24, or 2.2%, to 1126. Nasdaq Comp jumps 41, or 1.8%, to 2295.
Both the Dow and S&P break through their 200-day moving averages, according to Bespoke Investment Group. S&P 500 now faces resistance at its mid-June high of 1131, but the Dow’s next resistance level is all the way up at 10900, firm says.
Investors kick off August right where they left July off, as last month was the best calendar month for asset classes since November. But thinking the easy money is back in full force wouldn’t be prudent.
“The underlying economic worries that moved the crowd to sell in recent months haven’t gone away,” James Picerno writes at The Capital Spectator. “A more plausible explanation is that the fading appetite for risk in May and June went a bit too far too fast.”
Nevertheless, for a day, the risk trade was in full force: Treasurys were lower, the dollar dropped, gold closed slightly higher and crude surged 3% to $81.34, closing near a three-month high. Lots on tap for tomorrow; June personal income and spending as well as pending home sales, factory orders and auto sales.
US stocks essentially finish flat, with the DJIA erasing an early 120-point loss, as bulls were able to overcome a weak 2Q GDP reading.
DJIA closes down 1 to 10466, but finishes July up 7.1%, its first positive month since April and best monthly gain since last July. S&P 500 ticks up 0.07 to 1102, rises 6.9% for the month. Nasdaq Comp gains 2 to 2255, also ends July up 6.9%.
Better-than-expected manufacturing and consumer sentiment data provide bulls with enough fuel to overcome session’s early losses.
But one caveat comes with July’s performance: The monthly gains come amid thin volume as only two trading days in July exceeded the daily average on NYSE. Just something to keep in mind as the dog days of summer keep rolling on.
Banks are leading the market down, after JPMorgan’s earnings report looked great on the bottom line, but not quite so hot above there. Also, today’s data offer more dismal markers on the recovery.
Before you get to the video, ponder this from Capital Economics’ Paul Ashworth: “Today’s data releases suggest that the industrial recovery is rapidly losing momentum, making deflation an even bigger threat.”
US stocks pared earlier triple-digit losses but still finished in the red amid disappointing jobs, housing and manufacturing data ahead of tomorrow’s monthly employment report.
DJIA closes off 41 at 9733, marking its lowest closing value since October 30. The measure has dropped in six straight sessions, losing 5.5% of its value in the process, and has fallen in eight of the past nine trading days, overall. The losing streak marks the longest skid since Jan. 14, 2009. S&P 500 drops 3 to 1027 and Nasdaq Comp falls 8 to 2101.
Weekly jobless claims come in worse than expected, US pending-home sales plunged 30% in May and ISM’s manufacturing index fell more than expected. Yuck.
Stocks were able to bounce off session lows, but the bears are in the drivers seat this week and there’s currently no evidence suggesting anything’s about to change.
All eyes focused on monthly nonfarm payrolls tomorrow ahead of the holiday weekend.
US stocks falling yet again on, you guessed it, increasing concerns about the economic recovery. Yes, that’s a broad reason that always seems to get cited on a down day, but today the problem is magnified in the form of disappointing housing, employment and manufacturing data.
US pending-home sales plunged 30% in May, offering yet another piece of evidence of what the housing market will look like without the federal government’s home-buyer tax credit. Additionally, jobless claims increased by 13,000 to 472,000, not a good sign, especially since they need to trend toward 400,00 — not 500,000 — for substantial job growth. Then the ISM’s June manufacturing index dropped more than expected.
With all those negative factors weighing on the market, FusionIQ CEO Barry Ritholtz looks at the three C’s — clarity, conviction and consensus — to try to determine sentiment behind the recent market action. Unfortunately, there’s little clarity, he says, as there isn’t any substantial evidence the market has bottomed or topped at this moment.
There’s also little conviction. “The bears have had the upper hand for two months, yet we don’t see the shorts pressing their bets,” he says.
As for consensus, everyone seems to believe a double dip is coming. But Ritholtz has his doubts. “I cannot recall the last time a) so many people were projecting a recession, b) the crowd got it right,” he adds.
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 […]
Bernie Madoff tells CNNMoney he’s having trouble sleeping. Click here to read more about that from CNN. He doesn’t know how lucky he’s got it, living behind bars in America. In China this week, a 39-year old businesswoman received the death sentence for running a $70 million Ponzi scheme – pocket change next to the […]
