I'm Back - On Tap this week (July 27-31)

After being gone for a long weekend vacation, which was amazing, TSM has settled back into the work flow and is ready to keep the blog updated on the latest market happenings. Again, and as will be stated in the montly report card, TSM is not a fan of the recent rally - playing the long term fundamentals over short term swings, but clearly there is a rally occuring and, minus a slight pullback this week or so, its likely to continue until earnings are exposed, the plight of the consumer is emphasized to the nation and the hoopla over housing is mitigated for the stabilization it really is and not the growth the media seems to suggest.

WEDNESDAY = Durable Goods Orders at 8:30am; Durable goods orders plunged by -2.5% after an expected decline of only -0.5% and having posted strong positives for the prior two months. The slump in communication goods and transportation goods demand is largely attributable here. Moreover, last month's positive report of a 1.8% increase was revised down to a 1.3% increase.

5 year Note auction at 1pm (it'll be interesting to see if foreign bids/invest are weaker than previous as they were in yesterday's 2 yr auction + given that the government is auctioning off an unprecedented near $200 billion this week; yesterday was $42 billion of 2 years, today is $39 billion of 5 years; tomorrow is $28 billion of 7 years)... and a VERY WEAK auction result this afternoon...foreign investing accounting for only 37% of the bids, as compared to 50 or 60%+ weeks ago. The bid-to-cover ration was less than 2 at 1.92 showing that demand for these longer term financing securities may be waning, particularly from global investors.

WHATS THIS MEAN? The market doesn't like it considering people don't want to finance the stimulus and recovery. Rates are going to rise, which means so will mortgage rates on a housing market that has already seen refis and applications (while improved) start to dwindle as tax credits expire and rates increase. Bad news? or maybe just some reality after what some wise individuals have called the "sugar highs" of July.

THURSDAY = Initial jobless claims at 8:30am (expected job losses of -585,000 after reports of -554,000 last week and -522,000 the week before); And the results were right around expectations of -584,000. The market reacted strongly to this under the assumption that this is the peak. Whether right or wrong will remain to be seen. This report and that assumption are garnering expectations that in the past month only -330,000ish job were lost, as opposed to the -500,000, -600,000 and -700,000 reports we've seen in 2008 4Q and 2009 1Q.

7 year treasury auction at 1pm; This auction was not impressive but was acceptable and average. The big-cover ratio was back above 2 and at a reading of 2.63. Foreign demand resumed. And more than anything, this auction didn't propel fears of financing support dropping off the cliff.

FRIDAY = 2Q GDP initial estimate (of 3) at 8:30am (expected to come in at -0.7% after 1Q 2009's drop of -5.5%); WOW...this report is fascinating to me for so many reasons, so i'm going to devote the next 5 days and 5 blog posts to it and explaining/discussing GDP in general. That being said, the report revised 1Q 2009 GDP decline from -5.5% to -6.4% (4Q 2008 was -6.3%) and had a reading for 2Q 2009 of -1.0% (remember 2 more revisions on that number will come in the next 2 months). Most importantly, consumer demand fell -1.2% after rising 0.6% in 1Q 2009. Remember folks, that affects business inventory restocking (a huge support for recovery) and accounts for 70% of the American economy.

Chicago PMI at 9:45am (This Chicago business barometer is expected to rise from 39.9 to 44.0, which would follow a 5 pt rise last month. Still very low below 50, which indicates a reading of growth/expansion). The Chicago business barometer now reads 43.4. In line with expectations but still below 50.

On Tap this week (july 20-24)

The lack of posting this past week has been due to a busier week than usual. Maybe that means the my social life and work life are on the upswing. Maybe that means the general social and work lives of the economy are as well... last week's rally sure seems to think things are safe and getting better. Maybe that's a stretch and too optimistic though. Nonetheless, another week of earnings and economic news is upon us. NOTE: if the S&P500 breaks/closes above 955 we could likely be off to the races of nearing the 1000+ mark in short order.

S&P 500 start = 940

MONDAY = Leading economic indicators at 10am (expected to show an increase of 0.5% for June). The actual reading came in with an increase of 0.7%. This is the 3rd straight monthly increase. Despite continued substantive job losses, it appears that the bottom of a slow recovery is building. Job losses and a strapped consumer will continue to hinder the strength of the recovery but cannot totally prevent economic improvement and profit.

THURSDAY = Initial jobless claims at 8:30am (expected to bounce back up to 560,000 after the 522,000 mystical number from last week); Existing home sales at 10am (expected annual sales rate of 4.85 million, up from the 4.77 million of May)

FRIDAY = Consumer sentiment at 9:55am (expected to increase to 65 after last month's decline to 64.6)

On Tap this week (july 13-17)

Dow start = 8147

TUESDAY = Producer Price Index at 8:30am; PPI came in at 1.8% increase month-to-month. This was significantly higher than the 0.8% expectation but must be realized that this is due partly to jumping gas prices that have since alleviated. Nonetheless, still somewhat inflationary indicating... food contributed to the jump too unfortunately.

Retail Sales at 8:30am; These came in in-line with expectations of 0.5% increase month-to-month. Actual reading was a 0.6% increase. Gas and vehicle sales helped the bump here given summer driving and the inevitable final stop to the plummeting of auto sales. Again, not an impressive retails report.

Business Inventories at 10am; Business inventories declined more than expected (expectations of -0.8%) and came in with a reading of -1.0%. While inventory re-stocking show signs of manufactuing activity and economic growth, business inventory reduction could at least be good in the sense that businesses are working off spare inventory to get to a stable point in business. Thing is, shouldn't we kinda be at or around that point right about now...

WEDNESDAY = Empire State Manufacturing Index at 8:30am; Industrial Production at 9:15am

Empire State Mnftrg Index came in at a reading of -0.5 after last month's decline of -9.5 and an expectation of -4.5, indicating that the decline in manufacturing slowed significantly. New orders and shipments have GROWN and show positive hopes for a final stabilization of the fall downward.

Industrial Production declined -0.4% month-to-month. Capacity utilization is at a rate of 68%, the lowest in 50 approx 50 years. These results were in line with expectations for the most part (slight beating actually) and also showed a ceasing of the constant downward decline of the past 10 months.

THURSDAY = Initial jobless claims at 8:30am; Jobless claims came in better than expected at -522,000 but those numbers are not trustworthy. It is taken that seasonal and temporary auto-worker layoffs altered this outcome.

Philly Fed Index at 10am; The manufacturing gauge for the eastern/mid-atlantic coast came in at -7.5 when -5 was expected and last month's reading was -2.2. This reading shows the manufacturing ISN'T contracting less but that the decline is actually accelerating on a month-to-month comparison.

FRIDAY = Housing starts at 8:30am; Housing starts came in unexpectedly strong with a rate of 582,000 starts annually. This was above the 530,000 consensus expectation and represented the first back-to-back monthly increase in two years. Signs of a stabilized bottom? Very likely. This is the good news. The bad news is that short sales continue to account for a large percent (40+%) of current home sales. Moreover, the inventory of homes on the market is above traditional norms. So if sales continue to be weak or even decline, then adding new home starts isn't good.

On Tap this week (july 6-10)

Dow start = 8280

MONDAY = ISM non-manufacturing index at 10am (the expectation was for a reading of 46.7, compared to 44 previously). The report came in-line with expectations roughly and a reading of 47. New orders jumped more than 4 pts to a reading of 48.6. However, draws or reductions on inventory took that reading from 47 to 45, showing that non-manufacturing companies are keeping inventories low and skeptical of the green shoots. Again, and say it with me, it was a "positive" report that showed stabilization perhaps but not growth and was still a reading in the contractionary side of the index affirming the absence of economic growth.

WEDNESDAY = 10 yr note auction at 1pm; Prior concerns over whether the US would be able to find financiers to fund its longer-term debt have definitely subsided as the stock market has fallen back and begun its correction. Thus, treasuries are a safe haven for investors, meaning that we have financiers for that 787+ billion and we have declining rates as well on the treasuries (and thus mortgage rates). Good news despite the falling market prices. The 10 yr auction was very very strong with a bid-to-cover ration of 3.28.

Consumer credit at 3pm; After massive credit tightening over the past 3 months (last month consumer credit was decreased by -15.7 billion), June saw a slight tightening of only -3.2 billion. Don't consider this a strong positive. Banks are still seeing credit card defaults increase and outstanding credit card debt by consumers has hit an all-time high. Plus, -3.2 billion is still a big number. So don't take this to mean that consumers have access to leverage again. It's more of a non-starter really.

THURSDAY = Initial jobless claims at 8:30am; Initial jobless claims are a bit confusing this week as the number came in well below our -600,000 marker that the economy has been tracing. It came in at -565,000. However, this dip could be the result of changes in the timing of auto industry layoffs. Thus, it may not actually be representative of a slowing of layoffs quite yet. More importantly, "continuing unemployement" claims hit a new high - indicating that the number of unemployed AND UNABLE TO FIND A JOB TO GET OFF UNEMPLOYMENT continues to swell.

30 yr bond auction at 1pm; This auction was mixed but still had solid support from debt financiers with a bid-to-cover ratio of 2.38 (2 is fair). While a far cry from the 10 year auction that had a ratio of 3.28, this was adequate. The question is not IF but WHEN the support will wane. Likely as the dollar continues to receive skepticism or if the market revives. There are ALOT of auctions to come, given the many billions needed to be raised by the government. So this was a good sign, but a drop in the bucket of sorts. Can we keep the demand despite the over-supply will be the continual question.

FRIDAY = Consumer Sentiment at 9:55am; It's my least favorite report - because its a report based on optimism and in current market conditions, its causing way too strong of market swings that aren't based on reality. Nonetheless, positive consumer sentiment reports have helped upswings and may not help corrective retracements. The report came in low this month at 64.6 after a strong reading of 70.8 last month. Expectations were actually for an improvement to 71.5. This down consumer may reflect the tough times people are in and that consumerism wont save GDP or the economy anytime soon. Consumer expectations for the next 6 mths came in at a reading of 60.9.

On Tap this week (june 29-july 3)

The economic calendar has been slow lately. With the news vacuum, stocks have hovered in a narrow trading range and may well continue to do so as positive news continues to support "green shoots" talk while there is enough uncertainty and lack of progress to support "yellow weeds" counter arguments. This week however... we have a handful of employment and manufacturing reports between Tuesday and Thursday that will tell us exactly what the economy has been doing the past month. Should be interesting. The Dow is on a 2 week losing streak but minimally so and still well off March lows.

Dow start = 8438

TUESDAY = Case-Shiller Composite Index at 9am... This report showed moderating declines. This index tracks monthly changes in real estate/residential prices and showed very slight declines. I like the year-over-year comparisons particularly and that showed an improvement actually, with price declines of -18.1% compared to this time in 2008. This was up 0.6% from the last two months!

Chicago PMI at 9:45am (expectations are for a reading of 40. This is better than last month's reading of 34.9 but still shows that, since its below 50, business activity is contracting, not growing)... And thats exactly the reality. The reading came in at 39.9. New orders (a particular interest of TSM) rose again, but still below 50 and only marginally (from 37.3 to 41.6).

WEDNESDAY = ADP Employment Report at 8:15am. This report came out with an estimated job loss number for June of -473,000. This is the private companies number and government is expected to typically add jobs (i.e. the Obama agency creations, census hirings, etc), so tomorrows number should be better than this, but this is still above expectations of numbers in the high -390,000s.

ISM Manufacturing Index at 10am (again, expectations are that the index will remain in negative territory but IMPROVING or "less negative". Expectations are for a reading of 45, up from 42.8 last month). And that's exactly what you get, a number that continues to creep toward positive/expansionary indications of above 50 but is still below and in contractionary indication range. The reading was 44.8.

Construction spending at 10am (expectations are for spending to decrease by -0.5%); Construction spending decreased by -0.9% - a strong indication that new construction is suffering. This is a good thing overall in TSM's opinion considering we have too many residential and commercial buildings and real estate inventory on hand already. More interestingly, the year-over-year number shows construction spending for June fell -11.9% from June 2008.

Pending Home Sales at 10am. Pending home sales rose for the 4th straight month which is a strong positive. Note however that these are PENDING sales and we've seen a trend recently of closings that fall apart at the last second due to borrowing problems or (more likely) what one side or the other considers an improper assessment value for the home. Pending home sales rose 0.1%.

THURSDAY = Employment report at 8:30am (expectations are for joblosses in June to have been -350,000, which would be on line and consistent with the -345,000 reported in May; unemployment is expected to jump to 9.6%). While unemployment only spiked to 9.5%, the actual number of job losses for June came in well above expectations at -467,000, revealing a job market that continues to deteriorate in a significant way and showing that signs of slower deterioration may not be slowing quick enough.

Initial Jobless Claims report at 8:30am. Initial jobless claims fell 13,000 and came in at -614,000 initial jobless claims for the past week. This number is an improvement on the prior week of -627,000 but continues to show significant numbers of workers claiming unemployment week to week for the first time.

Factory Orders at 10am (expectations are for a rise in factory orders of 1.4% month-over-month. This would follow last month's rise of 0.7%, which was largely attributable to orders of durable goods and some business inventory restocking). Factory orders came in with a rise of 1.2%, pretty much in line with expectations. Good news but a far cry from anything that constitutes economic recovery and shouldn't be seen as a number that changes the landscape to any noticeable degree.

FRIDAY = MARKETS CLOSED FOR HOLIDAY

On Tap this week (June 22-26)

Dow starts = 8537

TUESDAY = Existing Home Sales at 10am; Existing home sales came in in-line with expectations – which are expectations for a slow and sluggish housing recovery. Sales moved up 2.4% from last month – but lets be honest, more people buy homes in the spring and particularly summer, so that’s just logical and expected. What is more important is the inventory of homes on hand, which needs to decrease. Low demand needs lower supply. A 9 month supply of inventory isn’t bad but when existing homes inventory alone is at 9.6 month level, it shows that even while housing is getting under control, its not exactly jolting upward anytime soon. (PS, rising rates, unfair and improper valuations/assessments, walk-away closings and foreclosures continue to be steady headwinds)

WEDNESDAY = Durable Goods orders at 8:30am; Durable goods came in strongly on the positive side at a 1.8% increase, when a -0.5% decline was the consensus expectation. More importantly, new orders were strong at 1.1% (up from 0.4% last month) and new orders were strong across the board

New Home Sales at 10am; Chalk up another vote for the "slow recovery" mantra. New home sales decreased -0.6% for May. Expectations were for a slight increase. New home sales are down 33% from May 2008 and the median sales price has dropped -3.4% from May 2008.

5 year Note auction at 1pm; The Auction went well from a raising money standpoint. The Bid-to-Cover ratio was a solid 2.58, which means that people want our money so we dont have to pay high yields to make people buy the treasuries (higher yields = less valuable currency and higher mortgage rates, etc). 63% of the auction bids were from foreign investors (another good sign that they want our money considering India, Brazil and China had REDUCED their exposure to US debt in the past 2 months).

Fed mtg announcement/comments at 2:15pm; Fed comments were relatively in-line with comments from last quarter's meeting; they will leave bank lending rates at 0-.25% for the foreseeable future (and prolly through 2009 at least). They also stated they will continue to buy treasuries/mortgages in an attempt to keep rates under control and that inflation was not on the horizon, but that deflation was not expected really either. Interesting note - the Fed has promised to buy about $1.25 trillion of treasuries and mortgages. Estimates show that there will be $2 trillion raised in new debt during the course of this recovery stimulus effort. If additional stimulus is needed or some of the Fed spending is on mortgages and not treasuries (so the total amount of debt needed to be purchased is closer to $3 trillion, then who is going to buy the remaining .75 or 1.25 trillion? That's a gamble to assume/rely on foreign governments to always be there and always buy, esp with comments from the BRIC countries that they'd like to be less dollar-heavy in their accounts. Bill Gross (Pimco stud) thinks the Fed will have to buy more debt - this only serves to weaken the stability and value of the currency and its possible AAA rating.

THURSDAY = revised 1Q GDP at 8:30am; Revised GDP came in at -5.5% (revised from -5.7%). Dont get too excited about this. This is the 3rd time the calculation has been done and its typical/was expected for it to be revised downward each time. This is still a horrible number - but its already priced into the market and shouldnt have trading consequences.

Initial Jobless Claims at 8:30am; Initial jobless claims had seemed to be lessening (if that word can be used in this context) with recent reports coming in closer to 600,000 than 650,000. This week suprised economists and came in at 627,000 claims, due to end of school year layoffs possibly.

7 year note auction at 1pm; These longer term treasury auctions are the ones that had/have people worried and curious. These are the ones that can affect higher rates/mortgage rates if there isn't demand, and when you have to auction off Trillions of dollars, you would think demand could be an issue. Well, not today or this week (earlier with the 5 year treasury auction). Demand was very strong at a 2.82 bid-to-cover ratio. 2 can be solid and over 2 shows increasing strength in demand. Yields on treasuries dropped and the 10 year rate is moved from 3.68% to 3.6%. Add roughly 1.75% and that's what a 30 yr fixed rate mortgage is likely to look like nowadays. (The goal is to get that 30 yr mortgage rate back below 5% to make loans cheaper and encourage home-buying and refis)

FRIDAY = the annoying Consumer Sentiment report at 9:55am

On Tap this week (june 15-19)

After a rather long number of days with limited posts, TSM is back. But no worries, last week was much like the week before it with very limited action, little movement, and less material developments. This week has a number of economic reports that coupled with investor restlessness and mounting expectations for actual visual progress could be instrumental to drive the market lower or higher - and I (for the sake of reality and not any malicious intent) believe lower is more appropriate.

Dow starts = 8799

Monday = Empire State Manufacturing Report 8:30am. THIS REPORT OF GENERAL BUSINESS CONDITIONS PREVIOUSLY HAD A READING OF -4.6. THE CONSENSUS EXPECTATION WAS FOR AN IMPROVED READING OF -2. THE ACTUAL READING WAS A VERY POOR -9.4. Housing Market Index 1pm (the previous reading of this index increased from 14 to 16 for May - however, this is more of an evalutative and opinion based report whereby survey respondents in the housing organization/industry give their thoughts/opinions on the general status of things. yes they know more about the industry than others but its possible that the pervasive and overwhelming optimism or should i say hope that is largely directing the market - despite a lack of corresponding reality in the economy - could inflate the reading beyond what actual data shows). HOMEBUILDER SENTIMENT UNEXPECTEDLY SLIPPED IN MAY FROM A READING OF 16 TO 15. THE ONGOING CREDIT CRUNCH AND RISING MORTGAGE RATES WERE LARGELY TO BLAME, ALONG WITH CONTINUED FORECLOSURES AS AVERAGE JOE FAILS TO BE ABLE TO PAY HIS BILLS AND THE SLOWING HOUSING DEBACLE CONTINUES TO EBB ITS WAY INTO REGULAR MORTGAGES.

Tuesday = Housing Starts 8:30am; HOUSING STARTS JUMPED 17.2% LAST MONTH, REBOUNDING FROM A TOTAL DIVE THE MONTH BEFORE. SO WHILE THE NUMBER SPIKE LOOKS GOOD, THE BALANCE BETWEEN THE TWO MONTHS MAY BE MORE MODERATE THAN THE 17.2 LETS ON. NONETHELESS, NEW BUILDING PERMITS (AN INDICATION OF FUTURE HOUSING STARTS/CONSTRUCTION) GREW 4%, THE BIGGEST GAIN SINCE JULY 2008. AGAIN, THE MONTHLY COMPARISONS ARE RELATIVELY SHORT-SIDED THOUGH;

PPI at 8:30am; PRODUCER PRICE INDEX CAME IN AT 0.2%, LESS THAN THE 0.6% EXPECTED. THIS CONTINUES TO UNDERLINE THAT INFLATION WORRIES APPEAR TO BE PREMATURE, NO MATTER HOW LEGIT.

Industrial Production at 9:15am; INDUSTRIAL PRODUCTION CAME OUT SLIGHTLY WORSE THAN EXPECTED AT -1.1%. THE IDEA THAT PRODUCTION IS DECREASING AND DEMAND FOR MANUFACTURED ITEMS IS DECREASING IS NOTHING NEW AND SHOULDNT BE SHOCKING. THE QUESTION IS HOW MUCH LONGER UNTIL THE EQUILIBRIUM BETWEEN CONSUMER SAVINGS AND STABILIZING PRODUCTION FIGURES. CURRENT SAVINGS RATES ARE AROUND 5% AND MANY PROJECT THEM TO HIT 10% AND THEN STABILIZE, SO WE MAY HAVE SOME WAYS TO GO. ALSO IN THIS REPORT, I FIND IT INTERESTING THAT "APPLIANCE, FURNITURE AND CARPETING" WERE DOWN -1.1% AFTER A 1.5% RISE THE MONTH BEFORE. THESE HOME PROJECTS AND DURABLE GOODS SEEMED TO BE ONE OF THE STRONG POINTS IN DATA AS CONSUMERS CONTINUED TO SPEND BUT ON MORE WISE ITEMS. NOW THOSE ARE WANING.

Wednesday = CPI at 8:30am; THIS REPORT WAS RELATIVELY UNEVENTFUL. BASICALLY, CPI INCREASED 0.1%, LARGELY BECAUSE OF THE RISE IN OIL. WHAT'S THIS MEAN - WELL, INFLATION WONT BE REARING ITS HEAD ANYTIME SOON LIKELY AND IT GIVES SOME SOLACE TO THE IDEA THAT PEOPLE CAN STILL AFFORD BASIC HOUSEHOLD ITEMS, EVEN IF THEY CANT AFFORD GAS TO GET THEM OR THEIR HOME MORTGAGE TO HOUSE THEM.

Thursday = Jobless Claims at 8:30am; INITIAL JOBLESS CLAIMS ROSE THIS WEEK BUT WERE LARGELY IN LINE WITH EXPECTATIONS. THE NUMBER CAME IN AT 608,000, CONSISTENT BUT SLIGHTLY HIGHER THAN THE REVISED NUMBER OF 604,000 FROM THE WEEK BEFORE. SO WHILE NUMBERS ARE NO LONGER IN THE MID TO HIGH 600S, CONSISTENT 600,000 JOB LOSSES ARE STILL VERY DRASTIC.

Econ Leading Indicators at 10am; THIS REPORT CAME IN IN LINE WITH EXPECTATIONS AT 1.2% INCREASE, JUST BEATING EXPECTATIONS OF 1%

Philly Fed Survey at 10am; THIS WAS THE REPORT THAT SUPRISED, COMING IN AT A READING OF -2.2 AFTER A -22.6 READING LAST MONTH. THIS IS THE BEST READING SINCE 2003. AGAIN, IM NOT HUGE ON SURVEYS THAT CAN TEND TO READ INTO HOPE AND OPTIMISM IN CURRENT DAYS, BUT ITS A MARKET MESSAGE THAT IS WORTH NOTING - ESP WHEN ITS THIS VOCAL AND STRONG.

Friday = options expiration day

On Tap this week (june 8-12)

Dow start = 8763

Thursday = Retail Sales at 8:30am; Initial Jobless Claims at 8:30am; Business Inventories at 10am

Friday = Consumer Sentiment at 9:55am

Other = Treasury auctions Monday, Tues, Wed, and Thurs (ranging from 3 month bills to 30 year bonds). $65 billion more in the 10 and 30 years treasuries will be issued this week. These treasuries have taken quite a hit lately with their rates raising - which is relevant considering how this pushes up the rates in home mortgages/refinancing. The focus on t-rates given greater risk appetite, concern about the US dollar stability and the fed's future rate increases makes Treasuries unusually exciting right now.

On Tap this week (may 26-29)

Dow starts = 8277

Tuesday = Consumer Confidence at 10am (see Consumer section as to why I'm not a huge fan of these reports even though they may temporarily move the markets). WELL NOT TO ANYONE'S SUPRISE, CONSUMER CONFIDENCE CONTINUES TO RISE ON THE GOODS NEWS OF THE MARKET GAINS AND THE POSITIVE SPIN OF ALL THE ECONOMIC EFFORTS. THE READING JUMPED FROM 40.8 IN APRIL TO 54.9 IN MAY (THE BIGGEST JUMP IN 6 YRS). THE MARKET REACTED BY SPURTING UPWARD DRAMATICALLY. NOTE THOUGH, THAT PEOPLE DESCRIBING JOBS AS 'PLENTIFUL' WAS STILL DRAMATICALLY LOW AT APPROX 5%. ONLY 5% OF PEOPLE PLAN ON BUYING A CAR IN THE NEXT 6 MTHS AND ONLY 2.3% PLAN ON BUYING A HOUSE.

Wednesday = Existing home sales at 10am (see housing below for really interesting comments/info on how foreclosures are keeping home sales and housing in general from bottoming, possibly until middle or late 2010). EXISTING HOME SALES ROSE 2.9% IN APRIL WHICH WAS EXACTLY IN LINE WITH AND MET EXPECTATIONS. ON THE BAD SIDE HOWEVER, IS THE FACT THAT EXISTING HOMES FOR SALE CONTINUED TO RISE (BY 8.8%), MEANING THAT EXTRA SUPPLY IS GOING TO LEAD TO CONTINUED PRICE DECREASES. THE AVERAGE HOME PRICE FELL 15.4% YEAR-OVER-YEAR.

Thursday = Durable Goods report at 8:30am. DURABLE GOODS SALES ROSE 1.9% IN APRIL, WHICH WAS ABOVE EXPECTATIONS. HOWEVER, MARCH'S NUMBER WAS REVISED DOWNWARDLY IN AN EQUALLY SHARP FASHION FROM A DECLINE OF -0.8% TO -2.1%. THE CONSENSUS EXPECTED FOR APRIL WAS 0.4%; Jobless Claims at 8:30am (see if they stay steady in the mid 600,000s or if they get closer to 700,000 with Chrysler/GM influence -- consensus expectation is 635,000). JOBLESS CLAIMS CAME IN BELOW EXPECTATIONS AT 623,000. INTERESTINGLY, THIS NUMBER DOES NOT REFLECT AUTO SALES FIRINGS, AS NO STATES REPORTED OR CITED JOB CUTS IN THAT SECTOR FOR LAST WEEK. HOWEVER, THE JOB LOSSES TO COME FROM THE CHRYSLER AND GM DEBACLES ARE INEVITABLE. CONTINUING UNEMPLOYMENT CLAIMS CONTINUES TO RISE REMINDING THAT NOT ONLY ARE PEOPLE LOSING THEIR JOBS BUT NEW JOBS ARE BEING CREATED AND PEOPLE ARE STAYING UENMPLOYED LONGER;

New home sales at 10am. NEW HOME SALES CAME IN MARGINALLY BELOW EXPECTATION FOR APRIL AT 352,000 HOMES SOLD WHEN ECONOMIC CONSENSUS WAS EXPECTING 360,000. THE AVERAGE SALES PRICE FELL 14.9% YEAR OVER YEAR. ALL THIS INDICATING THAT A HOUSING RECOVERY WILL (AGAIN AND AGAIN AND AGAIN WE REPEAT) BE SLOW AND LONG AND LESS THAN DYNAMIC, AS PEOPLE ARE STILL LOSING THEIR JOBS, ECONOMY REMAINS WEAK/EVEN NEGATIVE, AND SUPPLY OVERWHELMS DEMAND (DUE TO CONTINUED BUILDING BUT ALSO LARGELY DUE TO FORECLOSURES).

Friday = GDP report for Q1 2009 (initial estimate had come in at -6.1% but is expected to be revised to -5.5%); REVISED GDP FOR 1Q 2009 CAME IN SLIGHTLY ABOVE EXPECTATIONS AT -5.7%. THIS DATA POINT DOESN'T TELL TO MUCH. THE MAIN GDP DATA POINTS OF INTEREST WILL BE THE 2ND OF 2009 WHERE SOME ARE EXPECTING GROWTH. BEAR EXPECT CONTINUED DECLINES ALTHOUGH MUCH LESS SO. IT MAY BE THOSE DATA POINTS THAT ULTIMATELY RULE ON WHO HAS BEEN MORE ACCURATE IN ASSESSING THE ECONOMIC MALAISE. WHILE MARKET MOMENTUM HAS BEEN UP OVERALL, ECONOMISTS REMAIN FAIRLY SPLIT ON HOW THE 2ND HALF OF 2009 WILL LOOK.

Chicago PMI at 9:45am (this deals with manufacturing producers and how their business/inventories/etc have improved from month to month. The reading is expected to rise from 40.1 in April to 42, which is still below the crucial level of 50...below 50 = economy is contracting; above 50 = growing); Consumer Sentiment is at 10am (again, not a fan of this or Consumer Confidence reports) WELL, 1 MONTH DOESN'T A TREND MAKE, BUT THE MIDWEST MANUFACTURING REPORT CAME IN WELL BELOW EXPECTATIONS. THE REPORT SHOWED A READING OF 34.9, WHEN 42 WAS EXPECTED AND THE LAST MONTH'S READING WAS 40.1. MOREOVER, NEW MANUFACTURING ORDERS FELL NEARLY 5 POINTS TO 37.1 INDICATING THAT AN UPTICK IN ECONOMIC ACTIVITY IS NOT REALLY OCCURRING, OR AT LEAST NOT THIS PAST MONTH. KEEP IN MIND, A READING BELOW 50 MEANS THE ECONOMY IS CONTRACTING, SO EVEN A 42 WOULDN'T HAVE MEANT EXPANSION AND JOB CREATION AND GROWTH BUT RATHER LESS DETERIORATION. SO THIS PERSISTENT IDEA THAT THINGS ARE IMPROVING....WELL THEY REALLY AREN'T AND NOW IT APPEARS THEY MIGHT NOT EVEN BE GETTING WORSE AT A SLOWER RATE...

On Tap this week (may 18-22)

This "On Tap" segment will start each week with a highlight of the various reports/data to come out for the week. I will update the report results in the appropriate categories of the blog as well as by posting the reported data IN ALL CAPS in this "On Tap" segment. See last week for an example.

Dow start = 8268


Monday = Housing Market index at 1pm (economy can't stabilize until housing does)

Tuesday = Housing starts at 8:30am (inventory must go down before housing stabilizes, which means either sell more than you start building or stop new housing starts)... HOUSING STARTS FELL MUCH MORE THAN EXPECTED AND ARE DOWN 12.8%. THE YEAR-OVER-YEAR COMPARISON SHOWS THAT APRIL WAS DOWN 54% COMPARED TO HOUSING STARTS IN APRIL 2008. THE APRIL 2009 NUMBER REPRESENTS AN ANNUAL RATE OF 458,000 HOUSES STARTING TO BE BUILT PER YEAR. THIS IS LESS THAN THE EXPECTED RATE OF 520,000. WHAT'S THIS MEAN? LOOK AT MY COMMENTS IN THE “HOUSING” SECTION.

WHAT MAY BE MORE INTERESTING IS THAT BUILDING PERMITS (THE FORWARD LOOKING INDICATOR OF HOUSING STARTS) ALSO DROPPED MORE THAN EXPECTED = THEY DROPPED 3.3% AND ARE AT THE LOWEST LEVELS SINCE RECORD-KEEPING ON THIS SUBJECT STARTED IN 1960!


Thursday = Jobless claims at 8:30am (how will this number follow last weeks 637,000 suprise and will Chrysler/GM continue to feed the jobless numbers?); leading economic indicators report at 10am.

ECONOMISTS EXPECTED INITIAL JOBLESS CLAIMS TO COME IN ANYWHERE BETWEEN 620,000 TO 675,000, AND THE ACTUAL CONSENSUS EXPECTATION WAS AT 630,000. ACTUAL INITIAL JOBLESS CLAIMS CAME IN AT A MORE THAN EXPECTED (ALTHOUGH NOT EXACTLY CRAZILY LOW) 637,000. PRETTY MUCH A BREAK-EVEN, SHOWING THAT JOBLESS CLAIMS AND UNEMPLOYMENT ARE CONTINUING TO RISE AT AN ALARMING RATE EVEN IF FLATTENING OUT SOMEWHAT. WHAT IS MORE TROUBLESOME IS THAT THE "CONTINUING JOBLESS CLAIMS" NUMBER CONTINUES TO RISE - MEANING THAT NOT ONLY ARE PEOPLE FILING INITIAL UNEMPLOYMENT CLAIMS WITH THEIR STATES BUT THAT THEY'RE HAVING TO CONTINUE TO RELY ON THOSE UNEMPLOYMENT BENEFITS FOR A LONG TIME - AS OPPOSED TO FINDING A JOB AND NOT FILING "CONTINUING JOBLESS CLAIMS." THE "CONTINUING CLAIMS" NUMBER HAS CONTINUED TO STEADILY INCREASE AND INCREASED BY 75,000 THIS WEEK TO A TOTAL OF 6.7 MILLION AMERICANS FILING CONTINUING JOBLESS CLAIMS EACH WEEK. THE REPORT DIDN'T REALLY BREAK THE BANK EITHER WAY IN TERMS OF IMMEDIATE STOCK MARKET REACTION.

THE 10am ECONOMIC INDICATORS REPORT SHOWED SLIGHT IMPROVEMENT OF +1%. THIS CONTINUES TO ECHO OTHER 'GOOD' NEWS THAT IS REPORTED... ITS NOT EXACTLY GROWTH BUT MORE OF AN 'EASING OF THE RECESSION.' SO WHILE THAT IS GOOD NEWS, THE FLAW WOULD BE TO TAKE THIS AS A SIGN OR BELIEF THAT WE'RE GOING BACK TO ACTUAL POSITIVE ECONOMIC TIMES AND GDP.

THE 10am PHILLY FED REPORT IMPROVED TO A READING OF -22.6 FROM LAST MONTH'S READING OF -24.4. AGAIN, THIS SHOWS A SLIGHT IMPROVEMENT IN THE RECESSION BUT ITS STILL A NEGATIVE AND CONTRACTIONARY NUMBER/READING. SO THINGS ARE STILL BAD. AGAIN WITH THE SAME MANTRA I'VE TYPED FOR THE PAST WEEK OR SO -- ITS GOOD THAT SOME SIGNS ARE SLOWING BUT THEY AREN'T POSITIVE. STABILIZATION IS GOOD. JUST DONT MISTAKE IT FOR ACTUAL GROWTH OR TURNAROUND. MOREOVER, STABILIZATION IS JUST A BREATHING POINT BETWEEN EITHER THE NEXT MOVE UP ... OR DOWN. IF THESE SLIGHTLY IMPROVING REPORTS DONT EVENTUALLY SHOW ACTUAL GROWTH, THE MARKETS ARE GOING TO REACT IN A MEAN WAY BECAUSE THE MARKETS ARE EXPECTING AND HAVE PRICED IN A POSITIVE GROWTH NATURE FOR THE 2ND HALF OF 2009.

On Tap this week (may 11-15)

DOW start = 8543

Monday = 3 and 6 month t-bill auctions at 1pm. Expect continued strong demand. Any weakness plays into bear market rally belief. That would show that the world won't be funding our excessive debt mentality and that funding for capital raises by banks might be limited and not go over well.

Wednesday = Retail sales report at 8:30am. I believe retail sales will continue to slump and won't recover as quickly as expected due to tighter consumer and slow recovery in general. Also, comparisons of sales against last year should be weak considering that about this time last year is when individuals began to receive (and spend) their stimulus checks/money. AND THERE THEY ARE. RETAIL SALES CAME IN AT A -0.4% FOR APRIL AFTER ECONOMISTS EXPECTED A CONSENSUS OF A 0.1% INCREASE. IT APPEARS THAT CONSUMER DEMAND AND GDP GROWTH (AS POINTED OUT BY MEREDITH WHITNEY) MAY BE IN DOUBT. WHICH WAS ONE OF THE SERIOUS "GREEN SHOOTS" TO THE RECENT RALLY EFFORTS. MOREOVER, IT SHOULD BE NOTED THAT CONSUMER DECLINES EXTENDED TO ALL SECTORS (INCLUDING BUT NOT LIMITED TO ELECTRONICS, FOOD & BEVERAGE, GAS STATIONS), NOT JUST AUTOS.

Thursday = PPI report and Jobless Claims reports at 8:30am. Could reinforce inflationary fears and any jump in jobless claims would counter the idea that unemployment is less tragic nowadays. AND BOOM GOES THE DYNAMITE. WELL NOT ENTIRELY, BUT KIND OF. AFTER A FEW JOBLESS AND UNEMPLOYMENT REPORTS THAT SHOWED THAT THE WORST IS BEHIND US AND THAT UNEMPLOYMENT/JOBLESS CLAIMS (WHILE STILL VERY BAD) MAY BE LESS BAD, THE NUMBER OF INITIAL JOBLESS CLAIMS REPORTED FOR THE PAST WEEK JUMPED BACK UP TO 637,000. THIS EXCEEDED THE CONSENSUS OF 609,000 AND THE ENTIRE CONSENSUS RANGE EXPECTED BY ECONOMISTS ANYWHERE BETWEEN 590,000 TO 625,000. MORE FUEL TO SELL AND GO LOWER IN THE DOW? MORE REALITY TO A SITUATION THAT WAS SEEN AS TOO ROSY?

WHAT ELSE HAPPENED THIS MORNING? WELL, PRODUCER PRICE INDEX (AN INFLATION INDICATOR) CAME OUT THIS MORNING AND SHOWED A 0.3% INCREASE. THIS WAS WITHIN THE CONSENSUS RANGE EXPTECTED OF BETWEEN -0.4% AND 0.4%, BUT HIGHER IS ALWAYS WORSE AND THIS IS ON THE HIGH END, AS WELL AS EXCEEDING THE CONSENSUS EXPECTATION OF 0.1%. NOW, INFLATION SURGE ISN'T AROUND THE CORNER BUT NUMBERS LIKE THIS DON'T HELP. WHAT IS JUST AS, IF NOT MORE IMPORTANT, IN MY OPINION, IS NOT THE MONTH-OVER-MONTH CHANGE COMPARISON, BUT ALSO THE YEAR-OVER-YEAR COMPARISON... THE CORE PPI RATE INCREASE 3.4% YEAR-OVER-YEAR.

Friday = CPI report at 8:30am impacts inflation concerns; manufacturing and industrial production numbers are out at 8:30 and 9:15am...these numbers were very strong in March so seeing April can continue some element of improvement will be interesting. CPI INFLATION NUMBERES CAME OUT FLAT WITH NO CHANGE REALLY. SO THAT'S GOOD FOR INFLATION WORRIES. YEAR OVER YEAR CPI IS AT 2.4%. MANUFACTURING REPORTS SHOWED THAT MANUFACTURING IMPROVED BUT WAS STILL IN NEGATIVE/CONTRACTIONARY TERRITORY. SO WE'RE BACK TO THE QUESTION: DOES "LESS BAD" EQUAL "GOOD NEWS"? WE'LL SEE WHAT THE MARKET DOES TODAY, IF ANYTHING.