Investor’s first read – Brooksie’s edge before the open
Wednesday, April 4, 2012 9:08 a.m. ET
DJIA: 13,199.55 S&P 500: 1413.38
Yesterday’s market action reminded me of a traveler who comes upon a crossroads that isn’t on his map. Worse yet, he sees no signs to send him in the right direction.
This traveler could be institutional investors as a whole, or the Federal Open Market Committee (FOMC).
What’s wrong with this picture, why the sudden change of sentiment ?
We don’t know yet.
It’s not the economy as reported so far. The reports have been good, not great, but representative of an economy that is climbing out of a deep hole. February Factory Orders gained 1.3%, but fell short of an expected gain of 1.5%. That’s not it.
Fingers are now pointing at the FOMC which was mum on QE-3 at its March 13 meeting, but indicated it would move to stimulate the economy IF it needed it.
What’s wrong with that ?
Would the Street have preferred the Fed indicated the economy desperately needed stimulation ?
Anyone who expects too much from this recovery is just not realistic. We dodged a fatal bullet three years ago and should be grateful for the recovery we have today.
Whether the market has gotten ahead of the economy is debatable. A good case can be made for “yes” and “no.”
TODAY: Yesterday I said the market would move to new highs IF Factory Orders “hit or exceeded” expectations. Disappointment, I said, would call for a drop toDJIA 13,100 (S&P 500). Obviously the Factory Orders reported at 10 o’clock, were disappointing and the DJIA and S&P 500 dropped to those levels.
Really though, the report only missed by a hair, so there must be something else bothering the market, especially since we will open sharply lower today.
And, I can’t buy the pundits who blame the Fed. It is doing what is necessary.
I CAN ONLY CONCLUDE THE MARKET IS NERVOUS ABOUT QUARTERLY EARNINGS REPORTS DUE FOR RELEASE IN COMING WEEKS.
This means the market must drop to a level that discounts this uncertainty, and that probing process is what we are experiencing now.
Very big week for economic reports. They must confirm that the U.S. economy continues to gain traction. No room for doubts here.
ISM Manufacturing Index (10 a.m.) a survey of 300 manufacturers covering employment, production, new orders, supplier deliveries, and inventories, expanded faster than projections rising to 53.4 in March from 52.4 a month ago. Forecasters were looking for it to rise to 53. This report was reassuring since it had slipped in February to 52.4 from 54.1. Autos, corporate purchase of equipment and inventory also contributed.
Construction Spending (10 a.m.) includes residential, non-residential and public projects. Dropped 1.1% in February after a 0.8% drop in January, after a 1.4% increase in December and 1.9% in November.
Motor Vehicle Sales (7:45) includes domestic and foreign sales. Jumped 6.5% in February to an annual rate of 15.1 million
ICSC Goldman Store Sales (7:45) sales at 10% of major retail stores – a sampling but useful comparing one period to another. For the week ended March 31, ICSC Store Sales rose 3.8% vs a week ago, 4.2% year over year.
Factory Orders (10 a.m.) February orders were up 1.3% after a revised January decline of 1.1% but strong December and November months. February’s gain was less than a projected gain of 1.5% which may account for the market’s softness yesterday. Bloomberg’s survey of 60 economists ranged between a gain of 0.5% to 2.6% so prescience is kind of iffy.
ADP Employment (8:15 a.m.) increased 209,000 in March after a 215,000 increase in February. It is looked to as an early indication of Friday’s “Employment Situation” report.
ISM Non-Manufacturing (10 a.m.)a survey of 375 companies including agriculture, mining, construction, transportation, communications, wholesale, and retail trade. Up slioghtly in February
Jobless Claims (8:30) Dropped 5,000 for week ended March 24 to 359,000 from a revised 364,000 in the prior week. The four-week average is 365,000.
Employment Situation (8:30) Payroll employment increased 227,000 in February after a 284,000 jump in January and 223,00 jump in December.
Consumer Credit (3 p.m.) Gained $17.8 billion in January vs. a revised gain of 16.3 billion in December.
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.