We taped this before the headlines hit the wire from the EU’s energy commissioner, reporting on his comments that Japan’s nuclear crisis is out of control. Keep in mind that this is a man who’s half a world away from Japan making the comment, but still it sparked a mad dash across the markets.
On today’s Markets Hub, though, we focused on this morning’s housing and prices data, which weren’t exactly anything to write home about, mind you.
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.
Photo courtesy of Wiki Commons.
What you see today with reports on producer prices and industrial production, as well as earnings out of Target and Home Depot, is an economy where companies don’t have any pricing power because demand remains weak, and because demand remains weak, there isn’t the kind of production the economy needs to create jobs, and rising wages, that will drive sales and corporate profits.
Industrial production rose for a fourth month, but without a big jump in utilities — due to a cold snap — it would have broken that string, which brings up real questions about the recovery’s durability.
It’s Tomorrow’s News Today. And don’t forget to log onto WSJ.com at 4 p.m. today for The News Hub.
Get back in there and keep blowing!
This morning’s reports on producer prices and industrial production aren’t painting an exactly bright picture of the economy, and it’s those dark brush strokes on the underside of the economic landscape that are painting government officials into a corner, essentially forcing their hands into keeping the stimulus spigots wide open (wow, talk about mixing your metaphors,) bubbles and inflation be damned.
First there’s industrial production. Yes, it produced (pun intended) its fourth consecutive monthly gain, but that gain was by a scant 0.1%, and even that gain was wholly a result of increased output from utilities during a cold snap. Without that, IP would have slipped in the first month of the fourth quarter. “Manufacturing output (excluding the utilities) actually fell by 0.1% last month,” Capital Economics’ Paul Ashworth wrote.
“The modest 0.1% m/m gain in US industrial production in October suggests that the recovery in the factory sector may already be losing steam.”
And industrial production is still down 7.1% from a year ago.
Miller Tabak’s Dan Greenhaus takes note of the calendar, and points out the October is the first month of the fourth quarter. “The less than expected reading is therefore not the most encouraging way to start off the fourth quarter and should, along with the weaker Empire Manufacturing Survey, raise concerns a to whether or not there will be some moderation in manufacturing and output in the fourth quarter.”
This morning’s reports on producer prices and housing starts are putting a crimp in the bulls’ attempt to regroup after yesterday’s selloff.
Producer prices fell far more than anybody expected in July, downl 0.9%, wider than expectations of 0.4%; even the so-called core was down 0.1%. And while it’s being painted as yet another indicator that inflation fears are easing, we worry that those fears will ease right into deflation fears. (That’s right, we’re not afraid to say it.)
Between today’s report and last weeks consumer prices report, what we’re seeing is a considerable amount of slack in the marketplace, with companies having virtually no pricing power as consumers are pulling back on spending for just about everything (except, of course, in cases where the government’s giving money away.)
So don’t expect the Fed to announce it’s raising rates anytime soon.
The market just got plum tuckered out.
Goldman Sachs laid it out for the market, gave them the biggest, fattest target you could want. Monster quarter, earnings way ahead of even the most optimistic estimates. Problem is, the market used all its firepower yesterday chasing Meredith Whitney and the shorts.
Stocks rise only modestly today after yesterday’s big rally, despite Goldman’s earnings. The financials cede ground, as there are questions about how well Goldman’s earnings will translate to other banks, as well as how sustainable Goldman’s own result will prove to be.
J&J earnings also beat estimates, driving a modest gain for the stock. Video recap here.
DJIA adds 28 (0.3%) to 8359, S&P 500 rises 5 (0.5%) to 906, Nasdaq Comp gains 7 (0.4%) to 1800 (really, 1799.73, but we’re rounding). Big Board volume’s low. Crude’s falls 17c remaining under $60/bbl, and Treasurys fall as well.
So, whatdya make of today’s data? Really, we’d like to know. Seems to us none of it was very good, nor very awful, and maybe that’s what the “new normal” is all about.
Housing starts jumped sharply, producer prices fell, and industrial production and capacity showed that all that slack in the economy is still there. While there are a lot of numbers to chew on, they didn’t seem to point too strongly in one direction or the other.
And equities reflect that; the DJIA’s been bouncing around in a tight band centered on unchanged.
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