Wednesday, January 28, 2015

Ups & Downs for the US Economy (excerpt)

Yesterday was another up-and-down day for the US economy. On Monday, we learned that January’s Dallas Fed business survey suggests that the plunge in the price of oil is depressing Texas, the biggest oil-producing state in the US. On the other hand, plunging mortgage rates are lifting housing starts.

Yesterday, it was more of the same. Durable goods orders were weak, while new home sales were strong. Nondefense capital goods orders fell 0.6% for the second month during December. The weakest category is machinery orders, which declined 9.4% during the past four months. Leading the way down are orders for construction, industrial, mining, and farm machinery.

On the other hand, December’s new home sales data released yesterday showed a solid gain of 11.6% m/m to a new cyclical high. Even more impressive is the big jump in the Consumer Confidence Index this month. It soared from 93.1 last month to 102.9 this month, the highest since August 2007.

There was a significant drop in the percentage of consumers agreeing that jobs are hard to get to 25.7%, the lowest since March 2008. This series is highly correlated with the unemployment rate. If oil field workers are losing their jobs, that’s not having any impact on consumer confidence, which suggests that the job market is getting hotter.

Today's Morning Briefing: Yearning for Earnings. (1) Get ready, set, go. (2) The $120/$130 scenario. (3) Lowering S&P 500 target to 2150 this year and pushing 2300 to mid-2016. (4) Several factors weighing on earnings. (5) Not a zero-sum game. (6) Still waiting for usual earnings season upturn. (7) Industry analysts slashing 2015 and 2016 estimates. (8) Margin estimates falling. (9) Energy remains the biggest dead weight. (10) Durable goods are also heavy. (11) Consumer confidence is euphoric. (12) Focus on market-weight-rated S&P 500 Industrials. (More for subscribers.)

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