Key Economic Data Does Not Reflect Pending ‘Disaster’

Key Economic Data Does Not Reflect Pending ‘Disaster’

Key Economic Data Does Not Reflect Pending ‘Disaster’

$DIA, $SPY, $QQQ, $VXX

July New Home Sales and August Philadelphia Fed NonManufacturing Survey

Home Sales: +12.4%/ Philly Fed: -4 points; Orders: -14.9 points

The Big Q: With housing and hiring looking really good, where is the economic disaster we keep hearing about?

The notion that the US economy is nearing recession is also coming from mainline business commentators and some economists.

Gloom and Doom?

New home sales surged in July to the highest level since November 2007. It should be noted the jump in demand was concentrated in 2 regions, the Northeast and South.

The West was flat and the Midwest rose modestly.

The Northeast has been in irons since the recession began and it is still struggling. However, the South, which is the biggest region, has been steadily recovering.

That is important for overall market health.

On the price side

The median price went down in July and was off over the year. The growing number of lower price level sales may reflect the growing importance of new-entry millennials as well as builders recognizing the need to downsize homes to actually sell them.

Non-manufacturing activity was largely flat in the Philadelphia region, despite a softening in new orders.

Interestingly, sales/revenues were flat at their July marks, which indicates that firms have yet to see much of a decline in demand.

Special questions asked of the respondents pointed to solid increases in wages (3%), as well as inflation (2.5%) over the next year, which is above the US Fed’s target. Both manufacturers and non-manufacturers expect inflation to average 2.5% over the next 10 years. That may open eyes at the Fed.

The Atlanta Fed’s GDP Now 3rd quarter forecast remains in the 3.5% range.

The Q-2 decline in inventories, rather than the usual smaller increase, should reverse, implying a sharp rebound in growth is possible.

In Q-2, the inventory swing took 1.2% out of growth, with total business investment reducing GDP 1.7%. Modest investment gains, coupled with decent consumer demand, could get GDP 3%.

Existing home sales come out Wednesday, a modest July decline is expected. But new home sales were also expected to ease. If existing home demand is largely flat or even up, given the recent steady improvement, one may conclude the housing market is solid.

In recent days, a few US Fed officials suggested that they may be ready to move forward with normalizing monetary policy with another rate hike.

We have heard that talk before.

So, that is a wait-to-see situation, we may not have to wait past Friday when Fed Chairwoman Janet Yellen speaks from Jackson Hole, WY

Monday, the US major stock market indexes finished at: DJIA +17.88 at 18547.30, NAS Comp +15.47 at 5260.07, S&P 500 +4.26 at 2186.90

Volume: Trade was light with about 716-M/shares exchanged on the NYSE

  • Russell 2000 +10.0% YTD
  • S&P 500 +7.0% YTD
  • DJIA +6.5% YTD
  • NAS Comp +5.1% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.43) Bullish (0.39) Bullish (0.31) Very Bullish (0.58)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.39) Bullish (0.31) Bullish (0.44) Bullish (0.42)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.31) Bullish (0.25) Bullish (0.35) Bullish (0.33)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.39) Bearish (-0.29) Bearish (-0.42) Bearish (-0.47)

Stay tuned…

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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