Last week I highlighted a GDP tracking methodology called GDPNow that was very accurate with its Q1 estimate. In that report I said, "The Atlanta Fed has also come out with a Q2 tracking estimate and it's not bullish. Not yet, anyway. It is a paltry 0.9% but can be revised up with new economic data if they are bullish. If they are bad, however, the market may be sniffing a recession."
Last week there were a few reports that are important for the GDPNow report. For example, the earliest report last week was the Dallas Fed Manufacturing Survey that was supposed to be bad with its consensus at -12.0. It was actually -16.0. Bloomberg reported the following: New orders, arguably the most important reading of all, are at minus 14.0 with the related growth rate at minus 15.5 for its 6th straight negative reading. Companies in the sample are not upbeat about the outlook with this score coming in at a nearly 2-1/2 year low of minus 7.8. The workweek is down and capacity utilization is at a 6-year low of minus 10.4.
Looking at commentary, a few stand out: "Our oil & gas customers have come to a complete stop," "Lower energy prices have adversely impacted our business in the energy sector," and "It is going to be a tough summer."
Construction Spending data disappointed again as the actual reading was -0.6% vs the expected +0.4%.
The ISM Manufacturing Index was a bit of a surprise. Although the overall reading was slightly worse than expected (52.0 vs 51.5), it was still above the diffusion index's 50.0 threshold of 50.0 that reflects growth. The surprise was in the internal data. Bloomberg reported, There's a new unwanted wrinkle in the ISM report and that's weakness in employment, holding down the headline index to 51.5 in April, unchanged from March. Employment has been holding strong in other reports -- but not in the ISM report where the index is down nearly 2 points to a sub-50 level of 48.3 to indicate month-to-month contraction. This is the first time this reading is in contraction since May 2013 and it's the lowest reading since all the way back in September 2009.
Other reports were worse than expected like the one above; however, a few were better than expected. On balance, I would guess that the GDPNow report would be updated a bit lower than where it is now, and that started at a very low 0.9%. Wall Street analysts have also already started taking down their initial 3.0% targets, very slowly of course.
Trade well and follow the trend, not the perma-bull OR perma-bear "experts."
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
The markets finished off with a bang on Friday, as the major averages made strong gains to finish off the week. With the economic data surrounding the markets, we saw some volatile action throughout the week. The street found out the FOMC decided to not be transparent about the rate hike...
We are right in the thick of earnings season. This promises to be yet another busy period for our students in the classroom. With so many companies releasing their earnings reports, how do we discern which reports set us up with a profitable scenario?...
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