THE KEY ECONOMIC LANDMARKS WE PASSED
1. Retail Sales: 0.0% vs. 0.2% est.
On a negative note, retail sales came in flat for July. Consumers appeared to slow down purchases of big ticket items as motor vehicles, furniture, appliances, and department stores all saw declines. Falling gas prices over the last month and a half should give consumers’ pockets a boost in the upcoming months.
2. Industrial Production: 0.4% vs. 0.3% est.
Industrial Production came in higher than estimated and a bonus upward revision of 0.2% for June was also thrown in for good measure. Manufacturing (1%) and mining (0.3%) showed increases while utilities (-3.4%) dropped due to less demand from mild summer weather. Motor vehicles and parts saw a 10.1% increase which marked the highest since June 2009 and contributed largely to the 1.7% increase in production of durable goods. The interesting part about this subset is the decline in sales for motor vehicles and parts seen in the retail sales number. All signs still point towards the manufacturing industry picking up and holding strong.
3. U of M Confidence (Preliminary): 79.2 vs. 82.5 est.
Consumers threw economists for a loop with this release. The U of M reading hit a 9-month low as the outlook index fell to 66.2 from 71.8. However, another confidence indicator recently hit a post-recession high which appears to be in contradiction. It stands to be seen whether the U of M number means anything deeper.
LAST WEEK’S MARKET IN THE REAR-VIEW: “Stocks find footing but Ukraine causes missteps”
Most major indices remained a little shaky on Monday and Tuesday. Small caps roared out of the gates to start the week but quickly faded through Tuesday’s close. Mid-week the markets caught a bid as disappointing economic data allowed traders to buy with “The Fed will have to keep it’s loose policy longer” excuse. Friday appeared to be another risk on day until rumors about violence between Ukraine forces and Russian convoys started circulating. All-in-all, the week could be summarized as an average, low-volume summer week with Ukraine tensions causing turmoil. Investors on the sidelines have been using weeks like these to buy into the market. Treasury yields took a beating and the 10 Year is now firmly under 2.5% again. Bond investors piled into Treasuries last week as the flight-to-safety trade kicked into gear on Friday due to the Ukraine worries mentioned above.
LOOKING THROUGH THE WINDSHIELD
- A fairly busy week lies ahead of us, especially for the housing industry. Reports on housing starts, permits, the NAHB Index, and existing sales will show whether the upward trend in housing is back in force. Other than housing, July CPI numbers should provide more insight on the inflation front coupled with FOMC minutes on Wednesday.
- It appears last week’s buying action had some legs so it becomes a question of whether further issues in Ukraine and Iraq will stir the pot or if domestic news will provide a trump card for traders here.