Economic Reports & Market Observations 11/02/06
EIA Crude Inventories: Oil +2MB; YOY +15.2; Gasoline -2.8; YOY +7.7; Distillate -2.7; YOY +20.4; Propane +0.28; YOY +2.814. Inventories UP, Prices DOWN
Oct Retail Sales: Federated, J.C. Penney and Nordstrom posted gains. Chico's, Gap and American Eagle Outfitters reported sales below expectations.
Wal Mart reported preliminary October sales growth of just 0.5 percent at U.S. stores open at least a year, its smallest gain in more than two years.
Wal-Mart was joined by Costco, Target, Dillards & Kohl's in reporting lower than expected October sales, with all facing tough comparisons from strong monthly sales a year ago.
61% of U.S. retailers reported October sales below expectations, according to Retail Metrics. ICSC-UBS reported an industry gain in same store sales of 3% in Oct vs 4% in Sept.
Oct YOY Overall Auto Sales: GM +17%; Ford +9%; Chrysler -1.6%; Toyota +9%.
Inside the number: Lower gas prices & incentives halted the slide. However, the comparison is with a disasterous Oct 05 which was a 7 year low.
Steep production cuts have new orders declining in an effort to clear out inventories, further production cuts are coming.
ECB Rate: As expected, Trichet held rates at 3.25%, indicating a Dec raise of 25bps.
Initial Claims: +18K @ 327K
Inside the number: Initial claims at a 16 week high. Continuing claims -27K @ 2.42M, a four month low. Typically, unemployment benefits run out after 26 weeks for those who are eligible.
In September, about 33% of the 6.95M officially unemployed had been out of work longer than 15 weeks, while 18.2% had been out of work longer than 27 weeks.
Q3 Productivity FLAT vs Q2 revised down to +1.2% Full Report
Inside the number: Over the past year, productivity +1.3%, the slowest growth since 1997. No surprise here as productivity slumps when the economy slows, and the GDP numbers indicate this.
Unit labor costs +3.8% annualized and +5.3% in the past year, the fastest increase in 16 years, bonds turned down on the news.
The Malthusian Impasse on productivity has been hit.This threatens lower profit margins, rising costs, higher prices and future layoffs.
Greenspans productivity "miracle" was nothing more than the spawn of outsourcing to labor at the margin.
Hubba hubba, who do you trust?: "The acceleration in unit labor costs appears to be overstated," said Joshua Shapiro, chief economist for MFR.
"Simply put, there is no way that corporate profitability could be as strong as it is if unit labor costs were really growing at the pace that is being reported." Make one wonder about all these rosy quarterly reports?
Sept Factory Orders +2.1% vs prior revised from flat to -0.3%
Inside the number: Aug factory orders ex transportation -0.9%. Sept ex transportation, factory orders -2.4%, the 2nd straight decline.
Non durable goods -4.6%, however durable goods +8.3%. Overall shipments -3.5% and durable goods shipments -2.5%.
Keeping us treading water: Defense capital goods orders +41.8% & core capital goods orders +2%.
Market Observations: This is day 5 of profit taking, as of 3PM EST, the DJIA sitting on 12K, the SP500 1365.
Todays difference, bonds are finally having a down day. The recent divergence of TLT to SPY is indentical to early May. The bond market is ambivilent and screaming "rate cut".
This has gold contining its correction topping $625; $640 to $700 is possible, if bonds continue up and stocks down. A pullback in bonds is needed to jump start equities as fund managers are taking profit in stocks and buying bonds.
Good news, no panic yet, volume is normal with little volatility. I expect a rise to 1373-77, an upside failure here would constitute a headfake or bull trap, signaling more downside and in rapid order.
Near term, should the SP500 break below 1355 and the Demos win Tues, open the doors for the elephant herd and look out below as 1335 & 1290 await. However, status quo or a split, Demo. house, Repub. senate might get the market cheerful again.
Oct Retail Sales: Federated, J.C. Penney and Nordstrom posted gains. Chico's, Gap and American Eagle Outfitters reported sales below expectations.
Wal Mart reported preliminary October sales growth of just 0.5 percent at U.S. stores open at least a year, its smallest gain in more than two years.
Wal-Mart was joined by Costco, Target, Dillards & Kohl's in reporting lower than expected October sales, with all facing tough comparisons from strong monthly sales a year ago.
61% of U.S. retailers reported October sales below expectations, according to Retail Metrics. ICSC-UBS reported an industry gain in same store sales of 3% in Oct vs 4% in Sept.
Oct YOY Overall Auto Sales: GM +17%; Ford +9%; Chrysler -1.6%; Toyota +9%.
Inside the number: Lower gas prices & incentives halted the slide. However, the comparison is with a disasterous Oct 05 which was a 7 year low.
Steep production cuts have new orders declining in an effort to clear out inventories, further production cuts are coming.
ECB Rate: As expected, Trichet held rates at 3.25%, indicating a Dec raise of 25bps.
Initial Claims: +18K @ 327K
Inside the number: Initial claims at a 16 week high. Continuing claims -27K @ 2.42M, a four month low. Typically, unemployment benefits run out after 26 weeks for those who are eligible.
In September, about 33% of the 6.95M officially unemployed had been out of work longer than 15 weeks, while 18.2% had been out of work longer than 27 weeks.
Q3 Productivity FLAT vs Q2 revised down to +1.2% Full Report
Inside the number: Over the past year, productivity +1.3%, the slowest growth since 1997. No surprise here as productivity slumps when the economy slows, and the GDP numbers indicate this.
Unit labor costs +3.8% annualized and +5.3% in the past year, the fastest increase in 16 years, bonds turned down on the news.
The Malthusian Impasse on productivity has been hit.This threatens lower profit margins, rising costs, higher prices and future layoffs.
Greenspans productivity "miracle" was nothing more than the spawn of outsourcing to labor at the margin.
Hubba hubba, who do you trust?: "The acceleration in unit labor costs appears to be overstated," said Joshua Shapiro, chief economist for MFR.
"Simply put, there is no way that corporate profitability could be as strong as it is if unit labor costs were really growing at the pace that is being reported." Make one wonder about all these rosy quarterly reports?
Sept Factory Orders +2.1% vs prior revised from flat to -0.3%
Inside the number: Aug factory orders ex transportation -0.9%. Sept ex transportation, factory orders -2.4%, the 2nd straight decline.
Non durable goods -4.6%, however durable goods +8.3%. Overall shipments -3.5% and durable goods shipments -2.5%.
Keeping us treading water: Defense capital goods orders +41.8% & core capital goods orders +2%.
Market Observations: This is day 5 of profit taking, as of 3PM EST, the DJIA sitting on 12K, the SP500 1365.
Todays difference, bonds are finally having a down day. The recent divergence of TLT to SPY is indentical to early May. The bond market is ambivilent and screaming "rate cut".
This has gold contining its correction topping $625; $640 to $700 is possible, if bonds continue up and stocks down. A pullback in bonds is needed to jump start equities as fund managers are taking profit in stocks and buying bonds.
Good news, no panic yet, volume is normal with little volatility. I expect a rise to 1373-77, an upside failure here would constitute a headfake or bull trap, signaling more downside and in rapid order.
Near term, should the SP500 break below 1355 and the Demos win Tues, open the doors for the elephant herd and look out below as 1335 & 1290 await. However, status quo or a split, Demo. house, Repub. senate might get the market cheerful again.
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