MMRecap for March 2nd

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Last week’s reports took a long, hard look at housing, consumer attitudes, and the job markets, just to name a few. Almost all of them reported changes — some good, some not so good.
Monday’s only report featured existing home sales for January, which came in below expectations and lower than the previous month’s totals. The final count showed an annual rate of 4.82 million units — far below December’s 5.07 million units.
The Dow fell 23.60 points while the Nasdaq added 5.01 points. The S&P 500 declined 0.64 points. The yield on the 10-year note fell 7 basis points, to close at 2.06%.
On Tuesday, the Case-Shiller report edged up to 4.5% in December from 4.3% in November. Not a big move, but a move in the right direction. Consumer confidence in February dipped to 96.4 from 103.8 the previous month, but that’s still a pretty good number.
All stock indices closed in positive territory. The Dow closed up 92.35 points, the Nasdaq gained 7.15 points and the S&P 500 added 5.82 points. The 10-year Treasury yield went down 7 basis points for a second day in a row to close at 1.99%.
There was only one report on Wednesday that really mattered. New home sales in January were slightly down from December. The report indicated that 481K new home sales occurred in January compared to 482K in December. When we put things in perspective, January’s weather was much harsher than December’s, so 1K fewer new homes sold is not all that bad.
Wednesday was a relatively non-eventful day on Wall Street. The Dow inched up 15.38 points; the other two indices were down slightly with the Nasdaq closing down 0.98 points and the S&P 500 closing at -1.62 points. The 10-year yield crossed the finish line at 1.96%.
On Thursday initial jobless claims for the week ended on February 21 were up substantially. That was somewhat expected, now that the Christmas hires have been let go. New claims came in at 313K versus 282K the previous week. Continuing claims for the week ended on February 14, however, went down to 2401K vs. 2422K from the week before.
The January CPI report showed a 0.7% decrease in overall prices of consumer goods. We suspect that most of this decline was attributed to the low gas prices in January. The CPI core examines the same things but excludes food and energy prices, which are somewhat volatile. The core CPI report for January came at 0.2%, as weighed against the 0.1% in December. No big deal. Durable goods sales made a strong 2.8% comeback in January after posting a 3.7% loss in December.
When the markets closed on Thursday, it was a mixture of gainers and losers, but nothing earth-shaking. The Dow was down 10.15 points while the Nasdaq gained 20.75 points. The S&P 500 lost 3.12 points for the day. The 10 year yield moved up on Thursday, closing at 2.03%
Friday’s much-awaited reports were decent, but far from great. The second estimate on 4th quarter GDP dipped to 2.2% from the previous 2.6% reading. And the Chicago PMI took a real hit, tumbling from 59.4 to 45.8. It’s just possible that the miserable weather in the Midwest and the East Coast might have been a factor.
The good news was the final February consumer sentiment poll from the University of Michigan. The confidence level is swinging up to 95.4 from 93.6. The current number on pending home sales is also showing an upswing, going from -1.5% in December, to +1.7% in January.
When the closing bell rang last Friday, it was clear that investors were cashing in some profits. The Dow was down 81.72 points, the Nasdaq shed 24.36 points and the S&P 500 lost 6.24 points.
The MBA survey for the week ended on February 25, reported that mortgage applications decreased by 3.5% from the previous week. The refi share of applications went down to 62% from 66% one week earlier, and interest rates on conventional 30-year mortgages crept up to 3.99% from 3.93%.
Now it’s time to grab a huge mug of coffee and prepare yourself for the 21 reports scheduled for this week.
Today starts out with the reports on personal income and personal spending for January. Analysts expect income to increase by 0.4% or 0.5%, an improvement from the 0.3% from the last report. On the other hand, personal spending could show some minor improvement going from -0.3% to -0.1%. The next report is the PCE core prices for January. Both of the predicting parties are looking at 0.2%, compared with the 0.0% from the prior report. This will be followed the February ISM index, a look at manufacturing conditions throughout the U.S. Analysts expect an increase to 51 or 53, so let’s call it 52. The previous ISM report came in at 53.3. The final report for today is construction spending in January, which is iffy because that’s when the weather got really horrible in many parts of the country. Analysts believe it will come in at 0.2% versus the 0.4% in December, when the weather was somewhat better.
There are no meaningful reports tomorrow.
We will get several reports released on Wednesday. With the employment report for December coming out on Friday, there will be a few reports that might tip us off as to what’s ahead. The market estimators and the people believe that the ADP payroll report on employment change will show between 220K to 230K workers will have been added to payrolls in February. The report on ISM services is expected to edge down to around 56 in February — only a half-a-percent change.
On Thursday we look at the jobs situation, starting with initial claims for February. Both groups of analysts believe they might actually go down from the 313K reported from the previous week and be in the ballpark of 295K to 300K. Continuing claims have been hovering somewhere in the 2400K range for the past several weeks; not much is expected to change there. The revised Q4 report on productivity is not expected to swing much in either direction. Revised Q4 labor costs shouldn’t change that much from the 2.7% reported on the first iteration of this report. The factory orders report could show that production mode is going from a -3.4% in December to -0.1% in January.
On Friday we have another slew of reports starting with nonfarm payrolls. There could be some changes in this figure as both the market predictors and the people are thinking that the number could go down from 257K to around 240K. The report on the unemployment rate seems to be holding steady at 5.6%. The report on hourly earnings might be down a couple of tenths of a percent
There might some good news regarding the trade balance for January which is expected to come in at -$38.7B compared with -$46.6B from December.
Last this week we get the report on consumer credit, which was at -$14.8 billion in January and is expected to tame down to either -$12 billion or -$13 billion this month. Was that one or two cups of coffee worth of predictions?

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