Economic News

[Spaf]

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The Kingdom of TSP​

--NEWS--​

The Economy and Fundamentals
Bulls vs Bears

MARKET DATA: Economic Calendar

Link ---> http://www.bloomberg.com/markets/ecalendar/index.html

Link ---> http://www.briefing.com/Silver/Calendars/EconomicCalendar.htm


BEA: Economic Analysis

Link ---> [URL="http://www.bea.doc.gov/beahome.html"]http://www.bea.doc.gov/beahome.html[/URL]


Index of economic and market indicators

Link ---> [URL="http://www.bullandbearwise.com/"]http://www.bullandbearwise.com/[/URL]


Briefings: Stock Market Analysis. Updated: Each weekday before the opening bell.

Link ---> [URL="http://www.briefing.com/Silver/InBrief/PageOne.htm"]http://www.briefing.com/Silver/InBrief/PageOne.htm[/URL]


Economis news and comments

Economy and Politics: Link ---> http://tinyurl.com/cnl3e

Latest Economic Report: Link ---> http://tinyurl.com/8kmpu

 

[coolhand]

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I've not posted a whole lot in the past few weeks, but I haven't stopped trying to gain more perspective on the market (read global) during this time. It has been a tough year to say the least (for just about everyone).

While I do not have any articles to post at the moment, but I would like to comment on what I see going forward to the end of the year.

Currently, I donot see a catalyst to propel this market significantly higher.

While inflation is "supposedly" under control it is obvious the market has its radar on for any data that can be used to gauge the true picture. The marketis ona constant inflation watch (stox and bonds) for good reason...energy prices.The CPI is usedas a measure of what consumers are paying for goods minus food and energy. But it is no secret that food and energy costs are taking their toll.

Specifically, energy has been high profile in the media. Gasoline costs have soared and even though they have abated to a lesser degree there is no hard evidence that prices will drop significantly in the next few months. AG said recently that we will probably have to get used to these high prices. This is coming fromthe fed chair, but I have not seen too many folks willing to argue the point. Winter is not far off and those folks living in the colder climates are more than likely going to get hit with much higher costs to keep their homes heated than they have historically paid. No matter how I look at this it isn't pretty.

Supposedly, Joe Sixpac has been keeping our own domestic market afloat. How has he been doing this? We've been led to believe in large measure he's been tapping his home equity. And while I would not deny that I also believe there is another reason....low interest rates. We've also been told that the US savings rate is at an all time low. Gee, do you suppose it's all the cheap money? For the last several years savings account rates have been in the dirt. For quite a while it was less than 1%. LESS THAN 1%!!! Does this sound like a prescription for incentivizing savings??? And don't forget, we have to pay tax on all that savings too. Let's see, earn a paltry 1% or so on my savings or mount a HD plasma set onthe wall. Guess I'll get that plasma HD set. It'll make me feel a whole lot better.

How about the twin deficits? They haven't gotten any better lately. In fact this hurricane season has practically guaranteed it's getting worse. Remember last year how the twin deficits were one of the main reasons that the dollar was tanking? Wonder why that hasn't played this year? Interesting.

I've noticed, as many of you have I'm sure, that the 10-year note has been moving higher. It's 4.57% as of last Friday. Now I don't know where it's headed, but that means mortgage rates are moving higher too. Not enough to put a serious damper on the housing market, but something to keep an eye on. But since I've mentioned the housing market let me restate the fact that Joe Sixpac has been tapping his equity and fueling our economy. If housing finally cools off that cash flow stops. It's only a matter of time asprices can't keep moving higher without at least pausing at some point in time. While the cost of housing has many variables I found it very interesting recently to read that San Diego, CA has priced out all but 9% of folks living in the area. Scary.

Hey, it's the end of the year. Doesn't that mean a Santa Clause rally? I keep hearing we will rally to eoy like it's a given. Yeah, like this market's been following any kind of script this year...LOL.

I know this has all been negative comments about the economy, and before I get off that bent let me just throw it a few more quick jabs before I move on.

The current CIA leak probe (don't think Libby is the end of this), dollar uncertainty, Iran sabre rattling, Iraq war, Afghanistan, avian flu scare, terrorism. Boy, Ben's got his work cut out for him.

Okay, did I miss anything?

Dennis, I'll let you cover the positives...LOL.

While everything I've covered casts a negative light on the markets, I am not necessarily bearish. All this stuff creates fear and fear is what we need to drive the markets higher. I don't know how we're gonna get there, but I'm waiting for that catalyst. It may be China. It may be a global shift that sees the US savings rate turn higher while the savings glut in European and Asian markets begins to get spent.I don't know, but I sure hope it comes soon.

 

[Birchtree]

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Coolhand,

Not really very negative - the market can survive. The blessing going forward will be the manufacturing sector regaining momentum. American manufacturers, in a pleasant surprise, said business turned up in September, despite Hurricanes Katrina and Rita, and the jump in energy prices, a suggestion that the storms didn't do significant damage to the economy outside of the ravaged Gulf Coast.

The Institute for Supply Management reported its monthly index jumped to 59.4% in September from 53.6% in August, a 13-month high. A reading above 50 indicates the manufacturing sector is expanding. Many analysts had expected the September reading to decline. The consensus reading to be released on Nov. 1 is a drop to 57.5%. My bet is the index holds or increases in value.

The across the board improvement in orders, production, employment, and exports confirm that manufacturing outside the Gulf Coast region was not hurt by the hurricane disruptions. The ISM employment measure inched up to 53.1% in Sept. from 52.6% in August. Its index of new orders leaped to 63.8% in Sept. from 56.4% in August. Everything seems to be in place for a continued expansion with a resumption of the bull market. The new home owner sitting on his new porch will be left behind - but the bull doesn't want him along for the ride anyway - he made his choice so let him enjoy his new home fully slammed out.

 

[Spaf]

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[copied post]

Researched by: TheTechnician

US Economic Events & Analysis (10/28/05):

Simple Economics [Link] http://tinyurl.com/8jtg9

 

[Spaf]

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The Kingdom of TSP

The Constable Files

NEWS: While we haven't arrested Horseman Krude. He was last seen riding out of town!

 

[The_Technician]

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FOMC: hikes borrowing and saving rates




Short Take - November 2, 2005



Evelina M. Tainer, Chief Economist, Econoday




The FOMC voted unanimously to raise its federal funds rate target by 25 basis points, bringing the target rate to 4 percent, a rate we haven't seen since June 2001. While we don't yet have figures for October, it is unlikely that inflation will suddenly accelerate from the pattern we've seen over the past few months. With core inflation at roughly a 2 percent rate, and the fed funds rate target at 4 percent, it implies that the real fed funds rate is currently 2 percent. Also, it is important to keep in mind that core inflation is at the top end of the 1-to-2 percent range that appears acceptable to most Fed officials. Even if the core inflation rate remains at 2 percent, the Fed will want to raise rates further so that core inflation falls from the top end of the range.
The post-meeting statement was hardly changed from the September 20 statement. It basically reflected the fact that everyone has a better handle on the state of affairs reflecting the damaged Gulf Coast area. (In fact, FDIC chairman Donald E. Powell was named on Tuesday as the coordinator of the relief effort in the Gulf Coast region.) Fed officials continue to believe that the risks are balanced with respect to growth and inflation even though they do mention the possibility that "the cumulative rise in energy and other costs have the potential to add to inflation pressures." Nevertheless, the Fed remains "measured" in its approach. Most likely, the Fed will raise the funds rate target an additional 25 basis points in December and January - as is the consensus among Wall Street economists these days.
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So what does this mean for consumers?
The 2-year Treasury note yield has risen in tandem with the fed funds rate target, although not by the same magnitude each month. Yields did rise 31 basis points in October from the September average. Even though we have finally seen some increases in long term yields, these haven't been as large as increases in short term yields. The 10-year note yield did jump 26 basis points in October to 4.46 percent from the September average. At the same time, the average yield on 30-year fixed rate mortgage loans increased 30 basis points to 6.07 percent. Market rates move along with expectations of Fed rate changes, so Treasury yields and mortgage rates will probably continue to rise after today's rate hike, but only because investors are now expecting the Fed to raise the target rate again in December and January.
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Some consumer rates don't float freely in the market, but are determined by banks, which in turn depend on the Fed. For instance, banks' corporate base rate, also known as the prime rate, move in lockstep with the Fed. Given the 300 basis point spread, Tuesday's rate hike will push the prime rate up to 7 percent. Typically, banks tie their home equity loans as well as credit card rates to the prime rate.
Home equity loans are quite popular in that they remain (until the next tax reform) tax-deductible. While some homeowners refinanced their home loans to cash out equity, some may simply have used lines of credit to borrow against their home equity. Each measured increased in the fed funds rate target - and subsequently home equity loan rates - hurts consumers just a little bit more. We are taught in Econ 101 that all decisions are made at the margin. This means that each 25 basis point increase in the fed funds rate tightens the screws on one or two or three more homeowners.
In a similar fashion, credit card rates that are tied to banks' prime rate see incremental increases in the interest rate. For those consumers that maintain balances, the incremental 25 basis point hike will make a difference. Particularly now that consumer regulations are forcing credit card companies to double the minimum payments on consumers credit cards.
While the measured increases in the fed funds rate target are tightening the screws on consumers who borrow, they are also boosting interest income for savers. For several years, bank rates on savings accounts, including certificates of deposit, have been miserable. Finally, banks are offering rates (generally in line with Treasury yields) that make it reasonable to save again. Indeed, interest income payments on savings accounts are once again noticeable. While rising interest rates are generally viewed in a negative fashion by equity investors, small savers who do not invest in the stock market will be happy to see their savings account grow.
[align=justify]Bottom Line
To no one's surprise, the Federal Reserve raised the fed funds rate target by 25 basis points to 4 percent. As this rate gets filtered through the banking system, borrowers will find their costs increasing, but savers will find some extra money in their accounts. Higher borrowing costs will eventually choke off some spending, and while the higher interest rates for savings aren't likely to induce extra savings, regular savers will benefit from some extra income! [/align]

 

[Spaf]

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The Kingdom of TSP

The market and the economy: Q4

"Every year the past five years, the talk has started out that it will be a disappointing year. Then, it ultimately turns out just fine. This year will be similar. "
--Dick Green, Briefing.com

Rgds, and be careful! Spaf

 

[Spaf]

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The Kingdom and Krude

November 3, 2005


ENERGIES: December crude oil closed up $2.03 at $61.78 a barrel today. Prices closed near the session high today on a strong short-covering bounce from recent losses. But the downtrend from the late-August high of $71.57 remains in place.

 

[Spaf]

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The Kingdom of TSP - Economic News

November 4, 2005

Where's the Pizza? Ans: The Creature from the Cartel keeps raiding the Pizza vans!

Mark Cotton of MarketWatch had this to say: "You have the classic dichotomy where you have a strong economy, but you also have the Fed in a tightening phase, raising interest rates to slow it down."

Elsewhere:
Natural gas loses nearly 13% for the week
Oil loses 1% for week on mild weather, higher Gulf output
By Myra P. Saefong,MarketWatch

SAN FRANCISCO (MarketWatch) -- Natural-gas futures closed Friday at their lowest level since August, down almost 13% for the week, while crude-oil futures fell over $1 a barrel to end the week with a loss of 1%.

Light sweet crude for December delivery closed at $60.58 a barrel, down $1.20 for the session and down 64 cents for the week. The contract climbed by more than $2 on Thursday.

Oil and natural-gas production in the Gulf following Hurricanes Katrina and Rita continued to recover.

Sounds like good news to me! Spaf

 

[coolhand]

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This article makes a good point about the dollars chances to keep gaining strength...or not.

AG also had some words in the past few days about our govmnts uncontrolled and unsustainable spending. Once rate hikes stop, the dollar will probably turn.

http://tinyurl.com/8wngq

 

[Spaf]

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Economic Preview

Higher prices, slower spending
Data to show upside, downside risks to economy

ByRex Nutting, MarketWatch

Article link ----> http://tinyurl.com/cp6xe

 

[Spaf]

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The Kingdom of TSP

The Constable Files

NEWS: While the damage may have been done. It appears that Krude is on the run!

 

[Spaf]

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An Economic Look

November 17, 2005

Economic Insight, November 17, 2005. by Timothy E Rogers at Briefing.com

See article at link ----> http://tinyurl.com/cr3b4


Rgds Spaf

 

[Spaf]

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The Kingdom of TSP

The Constable Files December 5, 2005

News: Uh oh, It appears that Krude is back in the territory! Maybe a seasonal thing?

 

[The_Technician]

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2005 winds down
[font="Arial, Helvetica, sans-serif"]Econoday International Perspective - Monday, December 19, 2005

By Anne D. Picker, International Economist[/font]
International Perspective will be taking off next week. IP will return on January 3, 2006.
Happy New Year from all of us at Econoday!

Both the Bank of Japan and the Federal Reserve held policy meetings last week. The Fed continued to increase U.S. rates by 25 basis points - the fed funds rate is now 4.25 percent. As can be seen on the graph below, the spread between U.S. and British rates has now narrowed to only 25 basis points and with Australia to 125 basis points. In contrast, the spread between European and U.S. rates, which momentarily narrowed to 175 basis points, is now 200 basis points again. And with Japan the spread gets ever wider as the BoJ extends its super easy policy of zero interest rates.

The Bank of Japan, amid a good deal of political rhetoric and speculation by bank watchers, left its monetary policy unchanged. Interest rates remain near zero and the Bank will continue to flood the market with cash as it has for 4½ years in its fight against deflation. The BoJ kept the reserve target at between ¥30 trillion ($258 billion) and ¥35 trillion. In his post-meeting press conference, Bank of Japan Governor Toshihiko Fukui said that the Monetary Policy Board was close to ending its deflation fighting policy. The MPB thinks that the economy is achieving a well-balanced recovery which is steadily spreading throughout the economy. The Bank, he said, is also watching to see if core consumer prices (which excludes fresh food but includes energy) can achieve stable gains.
While an interest rate policy change may be on the horizon, its timing is at the center of a dispute between the BoJ and the government. Prime Minister Junichiro Koizumi has repeatedly insisted that deflation persists and it is too soon to stop fighting it. The government is concerned that a policy change may prompt investors to dump bonds, raising yields and the cost of servicing the nation's debt, which is projected to reach ¥774 trillion or 151 percent of gross domestic product by March.
The bank had raised rates in August 2000 in the face of government opposition, saying the economy had recovered sufficiently to cope with higher borrowing costs. Then seven months later in March 2001, it was forced to cut rates and adopt the quantitative easing policy again when global growth slumped after the Internet technology bubble burst. The BoJ has lifted the reserve target sevenfold since it adopted the policy. It has set three conditions that must be met for a change - core consumer prices stop falling for at least a few months; policy makers are sure they won't resume sliding; and the Bank is confident about the overall strength of the economy.
Ruling Liberal Democratic Party legislators have set up a committee to discuss the central bank's policy. The panel will urge the central bank to set joint economic policy goals with the government, with an aim to achieve a certain growth target. Kozo Yamamoto, the panel's chairman, told reporters yesterday the government and central bank should coordinate policies to achieve nominal economic growth of between 3.5 percent and 4 percent. The government has projected Japan's nominal growth at 1.3 percent this fiscal year (ending March 31, 2006). Fukui and other policy makers have said the bank will probably hold interest rates near zero even after it starts to reduce the amount of cash it injects into the banking system because prices won't likely rise quickly.
Now that the FOMC meeting is over...
Stocks became increasingly volatile as the end of year/holiday season drew closer. The yen continued its sharp rebound while interest in stocks in the major markets seemed to fade. Japanese stocks fell on concern that the higher yen would depress exporters' sales and profits. U.S. data were positive - that is, with the exception of the merchandise trade deficit which continued to burgeon. But the good data brought with it worries of future U.S. interest rate hikes. On the week, most indexes were up with the exception of the two Japanese indexes and the Nasdaq.
Global Stock Market Recap

Europe and the UK
Stocks in Europe and the UK closed the week on a positive note. German stocks benefited from utility stocks as well as the improving sentiment as evidenced by the ZEW and Ifo indexes. Friday's triple witching prompted greater volatility in indexes as investors adjusted their holdings of underlying assets. German stocks on Friday benefited from a better-than-expected reading in the Ifo confidence index as export-driven growth fueled spending at home.

Earlier in week, European stocks fell from four-year highs as the dollar dropped to its lowest level in more than a month against the euro, reducing the value of companies' U.S. sales. The euro's rise is adverse for exporters as prices for their goods go up. On the week, the FTSE was up 0.3 percent while its European counterparts, the CAC and DAX, were up 0.9 percent and 1.4 percent respectively.
Asia/Pacific
The yen's strength was not good news for Japanese exporters, and helped bring down the Nikkei and Topix last week. The Nikkei lost 1.5 percent while the Topix, 0.7 percent. The immediate cause was government plans to scrap income tax breaks adopted in 1999 to reduce the budget deficit. The ruling Liberal Democratic and New Komeito parties yesterday said Japan should abolish tax concessions for individuals and businesses by 2007. A possible end to the breaks could lead to a burden of ¥3.3 trillion ($28 billion) for taxpayers. Retailers' stocks sank on concern rising tax payments would hinder consumer spending. The concessions were introduced in 1999 as a temporary measure to spur consumer spending and help prop up stagnating economic growth. Japan's parliament passed a bill in March to halve the rebate to 10 percent in January.

Exporters such as carmakers and tech manufacturers were hit by the dollar's slide to its lowest level against the yen in a month. Most domestic sectors performed little better, as investors continued to show skepticism about recent market rises in the wake of Wednesday's weaker-than-expected Tankan survey. Sea transport - the most export-dependent sector - dropped.
Currencies
After drifting lower against the dollar, the yen did an abrupt about face and soared. The reasons are numerous including the possibility that the Federal Reserve may stop increasing U.S. interest rates. Other reasons abound including the continued improvement in the Japanese economy as evidenced in the Tankan survey for the fourth quarter (even though key numbers were below the optimistic consensus) and the Bank of Japan's upbeat forecast for the cessation of deflation and growth. But the Ministry of Finance is not shy about intervening if they find the currency too strong - and they have already warned that they are monitoring the situation.

The euro also gained on the dollar last week. Improved sentiment combined with easing inflation helped improve the currency. Sentiment now has turned on the ECB's 25-basis-point increase on December first. The consensus seems to feel that the move would not hurt the fledgling recovery.

Indicator scoreboard
EMU - November harmonized index of consumer prices was down 0.2 percent but up 2.3 percent when compared with last year. The monthly decline was due to the decline in fuel prices. Core HICP which excludes energy and unprocessed food was up 0.1 percent and 1.5 percent on the year. Prices for clothing were up 0.5 percent and for food by 0.3 percent. Eurostat will change the HICP base year to 2005 from 1996 effective with January 2006 data.

Germany - December ZEW economic sentiment index soared to a reading of 61.6 from 38.7 in November. Contributing to the gain was stronger equity markets, a weaker euro, lower oil prices as well as the apparent willingness of companies to invest. The monthly survey is conducted by the Mannheim-based Center for European Economic Research (ZEW). ZEW surveyed 317 German financial experts for their opinions on current economic conditions and the economic outlook for major industrial economies between November 28th and December 12th.

December Ifo business climate index jumped to 99.6 from 97.8 in November. The index showed that business confidence increased to the highest in more than five years. The confidence index is derived from a monthly survey of 7,000 executives.

France - October merchandise trade deficit widened to €2.463 billion from a deficit of €1.534 billion in September. Exports dropped 3.0 percent after a 1.5 percent gain in September. The ministry said the decline in exports was particularly noticeable in capital goods and automobiles. In contrast, exports of unfinished goods, consumer goods and energy products remained strong. Imports were virtually unchanged in October. A modest increase in unfinished goods, consumer goods and capital goods imports were largely offset by a drop in purchases of foreign automobiles.

Italy - October workday and seasonally adjusted industrial output sank 0.9 percent and was down 2.7 percent when compared with the same month a year ago. The declines were everywhere. Consumer goods dropped 1.2 percent, investment goods declined 0.7 percent, intermediate goods sank 1.4 percent and energy goods were down 1.0 percent.

October world merchandise trade deficit was €261 million, significantly smaller than September's deficit of €2.4 billion. In October 2004, the trade balance had a surplus of €199 million. Exports were up 3.3 percent but imports soared by 5.1 percent primarily driven by energy and consumer goods purchases. Istat said that much of the 2005 deficit was due to increased energy costs.

Britain - November producer output prices were down 0.2 percent and up 2.3 percent when compared with last year. Excluding food, beverages, tobacco and petroleum, output prices edged up 0.1 percent and 1.3 percent on the year. Food prices were up 0.5 percent and chemical products were up 0.7 percent but petroleum products were down 3.3 percent on the month. Producer input prices were up 1.4 percent and 12.7 percent on the year. Core input prices were up 1.6 percent and 8.7 percent on the year. Crude oil prices were down 3.1 percent but all other categories were up on the month.

November consumer price index was unchanged and up 2.1 percent when compared with the same month a year ago. Transport prices - such as those for airfares and gasoline - declined. Retail price index excluding mortgage interest payments was up 0.1 percent on the month and up 2.3 percent on the year. The CPI is used primarily for monetary policy purposes while the retail price index is used as a parameter for things such as wage increases and the like.

Average earnings growth for the three months to October slowed to 3.6 percent from 4.1 percent when compared with the same three months a year ago. Excluding bonuses, average earnings dropped to 3.9 percent in October from 4.0 percent in September. Private sector earnings dropped to 3.5 percent from 4.1 percent, while public sector earnings dipped to 4.1 percent from 4.2 percent.

November claimant count unemployment was up by 10,500 and the claimant count unemployment rate remained at 2.9 percent for the second month. For the three months through October, the International Labour Organisation measure of unemployment was up 72,000 on the previous three months. The ILO unemployment rate jumped to 4.9 percent from 4.7 percent in the previous three months.

November retail sales were up 0.7 percent and 2.1 percent when compared with last year. Food store sales were up 0.5 percent and 2.8 percent on the year while non-food sales were up 0.8 percent and 1.8 percent on the year. Non-store retailing was up 1.2 percent.

Asia
Japan - November corporate goods price index was unchanged on the month and up 1.9 percent when compared with last year. Prices for nonferrous metals and iron and steel scrap were up while gasoline prices were down.

Fourth quarter large manufacturers Tankan survey climbed to 21 from 19 in the third quarter. Sentiment about major oil refiners and nonferrous metal makers showed a marked improvement in light of high crude oil and commodities prices while large wholesalers, retailers and food and beverage sectors reported sagging sentiment. The index for small manufacturers was 7, up from 3 in the previous quarter. The Tankan, which means short-term economic outlook, surveys more than 10,000 companies and is the most closely watched index of business confidence in Japan. It asks companies about their outlook for business including sales, profits, spending and employment. Companies were surveyed between November 10th and December 13th.

Americas
Canada - October merchandise trade surplus was C$7.2 billion, virtually unchanged from September. The surplus with the United States increased from C$10.7 billion to C$11.1 billion but remained below the January 2001 record high of C$11.3 billion. Exports to the U.S. soared by 2.3 percent while imports from the U.S. were up 1.5 percent. The deficit with countries other than the United States widened from C$3.5 billion to a record high C$3.9 billion. Exports were up 1 percent while imports increased by 1.2 percent. Natural gas exports were the main contributor to rising exports while shipments of lumber and sawmill products, passenger vehicles, and live cattle also registered gains. Exports to other trading partners fell 4.5 percent while imports edged up 0.7 percent.

October manufacturing shipments were up 0.9 percent and 3.4 percent when compared with last year. The transportation equipment sector was again the key mover as a sizable jump in motor vehicle manufacturing boosted total shipments by 0.9 percent. Excluding the volatile motor vehicle and parts industries, total manufacturing shipments remained unchanged from September's level. Increased shipments were concentrated in 10 of the 21 manufacturing industries accounting for 57 percent of the total. Unfilled orders rose 1.4 percent to $42.5 billion in October, the eighth increase so far in 2005. Orders now stand at the highest level since December 2002. New contracts in the aerospace industry led to a 1.4 percent surge in unfilled orders. Excluding the aerospace products and parts industry, unfilled orders edged up 0.2 percent for the month. New orders were up 2.3 percent, more than offsetting September's 1.9 percent decline. Increases in aerospace and motor vehicle industries were responsible for October's surge in new orders. Excluding the transportation equipment sector, new orders declined 0.3 percent.

Bottom line
As attention switches full time to end-of-year festivities, markets tend to become volatile primarily due to thin volume. There will be some important data releases in Europe such as M3 money supply and the unemployment rates for both France and Italy. The usual end-of-month deluge of Japanese data will be closely watched by those that are not on vacation.
Investors should be in a cheery mood as we enter the holiday season. Overseas equities have had a very prosperous year, far outperforming U.S. stock indexes. And most gains will be in double digits. With the prospect of more countries participating in world growth finally becoming a reality, investors' choices will multiply.
Looking Ahead: December 19 through December 23, 2005

Looking Ahead: December 26 through December 30, 2005

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[oldschool]

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Durable Goods up 4.4%, mostly airplanes. Above the expected 1.1%. Soft housing landing offset by capital expenditures from business sector? Pundits have been saying that for a long time, but maybe it is actually happening....

 

[The_Technician]

Redbook sales report

Redbook reported a big drop in same-store sales for the key Dec. 31 week, at a 2.6% year-on-year rate compared with 4.5% in the prior week. The report said the month ended below plan and that post-Christmas sales, hurt in part by heavy weather in sections of the country, lost momentum. The report confirms similar results this morning from ICSC-UBS's tally as well as disappointing news over the weekend from giant discount chain Wal-Mart.

High gas and home fuel prices appear to have limited consumer spending and shopping trips in what appears to have been a weak holiday season for the nation's retailers, which will offer their own results tomorrow. There was no immediate reaction in the markets to Redbook or ICSC-UBS, but they may support bonds through the day and may weigh on the dollar and stocks. Note that share prices of retailers have been soft in recent sessions.

 

[The_Technician]

ICSC-UBS sale reports.....

Holiday sales are proving soft as ICSC-UBS reports a 2.9% year-on-year same-store sales rate in the Dec. 31 week, well below last week's 3.9% rate. Week-to-week, sales were down 0.8%.

The report said heavy post-holiday discounting cut into sales totals. For December as a whole, ICSC-UBS expects sales to rise a moderate 3.0% to 3.5%. Chain stores will report monthly results on Thursday. Redbook's tally for the latest week is up later this morning.

 

[The_Technician]

manuf index

The Institute For Supply Management's manufacturing index fell sharply in December, to 54.2 vs. 58.1 in November. The reading follows three months of sharp gains but still points to acceleration in the nation's manufacturing sector.

But order readings, which point to future business activity, were a disappointment. New orders fell to 55.5 vs. 59.8 in November and mark one of the lowest readings of the year. New export orders also fell, to 54.3 following November's big spike to 59.2 that came despite strength in the dollar. Backlog orders showed the most weakness, falling to 49.5 from 53.0. Readings below 50 indicate that a greater proportion of the sample's roughly 250 respondents reported month-to-month declines than gains.

The report's prices paid index offered good news, falling to 63.0 from 74.0. The index was all over the map in 2005, showing 60 and 70 readings in the first half of the year tied to rising energy prices before posting a big dip below 50 just before September's hurricanes. Hurricane dislocations then drove the index to over 80. The current reading suggests that month-to-month price pressures have eased in line with steady though still high energy prices.

Employment was also weak, down to 52.7 from 56.6. This reading may temper expectations for factory payrolls on Friday. Disruptions in supplier deliveries appeared to ease in line with slowing growth, as the index fell to 53.5 from 58.3. The decline suggests that rail and truck snags may be lifting. Respondents once again reported a month-to-month contraction in inventories, at 47.2 vs. 49.3.

The report points to slowing growth in an otherwise still very healthy manufacturing sector. Bonds, benefiting from both lower prices and slower growth, rose in initial reaction to the report while the dollar fell. The report may weigh on the stock market through the day.
Market Consensus Before Announcement
The ISM manufacturing index declined one point in November to 58.1 from October's level of 59.1. The New York Fed's business outlook survey showed improvement in December, as did the Philadelphia Fed survey.

ISM manufacturing index Consensus Forecast for Dec 05: 57.5
Range: 56.3 to 61.5
Trends

The ISM manufacturing index (formerly known as the NAPM Survey) is constructed so that any level at 50 or above signifies growth in the manufacturing sector. A level above 43 or so, but below 50, indicates that the U.S. economy is still growing even though the manufacturing sector is contracting. Any level below 43 indicates that the economy is in recession.

 

[The_Technician]

Construction spending.....

Construction spending inched up 0.2 percent in November after posting stronger gains in the past several months. For the first time in many months, residential construction spending dipped 0.1 percent, although nonresidential spending increased 0.5 percent for the month. Among the nonresidential component, several of the categories posted declines. However, large increases were posted for commercial buildings, communication, and sewage & waste disposal. As the residential sector begins to moderate, construction expenditures may still post gains as investors move to the nonresidential sector of the economy.
Market Consensus Before Announcement
Construction spending increased 0.7 percent in October after a downward revised gain of 0.2 percent in September. As housing construction moderates, we could see some smaller gains in the next few months - unless nonresidential construction spending posts robust gains.

Construction spending Consensus Forecast for Nov 05: 0.7 percent
Range: 0.5 to 1.2 percent
Trends

Construction spending has moderated significantly over the past year despite strenth in the housing market. Residential construction is not growing as rapidly as it did even though current levels are high. Nonresidential construction has begun to improve, but gains are still modest.