A Deeper Look At Consumer Spending

Here is a graph of the year-over-year percent change in consumer spending in chained 2000 dollars. DG = Durable Goods, NDG = Non-Durable Goods and Service = service (duh). Pay particular attention to the first two areas of change. They represent the first year over year levels of consumption expenditures coming out of a recession. Here is the point...

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Consumer Spending Year Over Year Change

Here is a chart of Personal Consumption Expenditures year-over-year change in chained 2000 dollars. The previous chart I used was derived from the wrong data s...

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Construction Spending Up .2%

From CBS:Spending on U.S. construction projects rose 0.2% in March, fueled mostly by outlays for private nonresidential projects and offsetting a drop in spending on federal and private residential construction.Construction spending in February was also revised to rise significantly upward, by 1.5%, from a previously estimated gain of 0.3%, causing some economists to boost their projections for first-quarter economic growth.Let's look at the numbers: Total annualized construction spending was $1.187 trillion in March, with private construction...

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Consumer Spending Decreases .2% In March

From the AP:The Commerce Department reported that consumer spending on all items was up 0.3 percent last month, the slowest increase since a similar rise in October. Incomes rose by 0.7 percent, the fourth straight solid month of income growth.The spending performance was even weaker when the effects of higher gasoline prices were removed. After adjusting for price increases, consumer spending actually fell by 0.2 percent in March, the poorest showing since the fall of 2005 when the economy was suffering the aftershocks of Hurricane Katrina.From...

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Technical Issues Hurting Refiners

I've been closely following the gas market for the last few months. The reason is simple: gas prices are higher than the same time last year partly because gas stockpiles are down in a big way (here's a link to the latest update.) It turns out refiners are having more problems than usual:Oil refining's perception problem has taken a new, unflattering turn: Not only are there not enough U.S. refineries, they don't run right.After several years of calls for more production capacity in one of the world's most technically sophisticated industries,...

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Big Stocks Finally Beating Small Stocks

From the WSJ:For months, Wall Street professionals have been recommending big-company stocks as a safe bet in a slow-growing economy, only to be proven wrong as small stocks surged ahead.Now, after the Dow Jones Industrial Average's run this month to records and its first close above 13000, gains for blue-chip industrials this year are equal to those...

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The End of Free Banking

The Office of Fair Trading (OFT) last week announced that it would launch a full-scale investigation into unfair bank charges on current accounts. The OFT inquiry will be completed by Christmas, and will examine whether the "provision of so-called free banking" is explained clearly to customers. The OFT will also continue to study the fairness of unauthorised overdraft fees.OFT chief executive, John Fingleton, said:"This market study will enable the OFT to consider wider questions about transparency and value in the provision of personal current...

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Painting Weekend

I'm painting the house this weekend -- with much needed and appreciated help from Bonddad's wonderful girlfriend. I'll be back Sunday nig...

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Gasoline Supply May be Very Tight This Summer

From CNBCPhil Flynn, a member of Alaron Trading, told CNBC’s “Squawk Box” that the U.S. may face tight gasoline supplies this summer.“(Production numbers) better change soon,” Flynn said Friday. “Otherwise, we’re going to have big problems in this country. I don’t know how we’re going to get gasoline supplies where they need to be by Memorial Day....

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Advance Estimate GDP = +1.3%; Price Deflator Increases 4%

From the BEAReal gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.3 percent in the first quarter of 2007, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.5 percent. The Bureau emphasized that the first-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The first-quarter...

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Treasury Market Update

Let's take a look at the weekly 10-year Treasury chart.There are two trends on this chart.1.) Since interest rates hit 5.25% in early July 2006, rates have headed lower. Remember that Treasury prices and yields move inversely, so this means traders have been buying treasury bonds. This means there is at least a diminished fear of continued inflationary...

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Earnings Are Good, But Beware Comparisons

From IBD:With more than half of companies reporting so far, analysts are looking at high single-digit year-over-year gains. That would snap the streak of 14 straight quarters of double-digit earnings growth.But that is a lot better than Wall Street was predicting at the start of earnings season.With fear of a slowing economy, many firms issued conservative guidance or none at all. Analysts didn't want to go out on a limb."People had really ratcheted down their expectations, so it was going to be pretty easy to get over," said Dirk van Dijk of Zacks...

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Barclays Face Investigation

Barclays face an investigation by the Information Commissioner's Office (ICO) as a result of the recent BBC programme "Whistleblower", which placed an undercover reporter in a Barclays call centre and one of their high street branches.Whistleblower alleged that call centre staff accessed private customer files, and made sales calls to people who asked not to be contacted.The ICO said that the allegations were a cause for concern. The BBC placed their undercover reporter in the Doxford call centre in Sunderland, where she found examples of mis-selling,...

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Weaker Dollar Boosting Earnings

From CNBC:Of those 19 Dow components--about two-thirds of the Dow--one company, Alcoa, had a negative impact on revenue from currency changes.Two companies--AT&T and Intel--told us that there was no effect. But 14 companies had a positive impact, ranging from a low of 7% to a high of 51%.The average company had a 27% positive currency earnings...

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Market's Overview

With the markets rallying right now, let's take a look at the overall technical picture of the markets to see exactly what they look like.First, here is a chart of the SPYs and QQQQs. Both markets have a very nice uptrend in place. It's not too steep and not too shallow. W.D. Gann -- one of the greatest traders the market has ever seen, hypothesized...

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More Signs of International Strength Helping the US

From today's WSJ:More than half of General Electric Co.'s revenue is expected to come from outside the U.S. for the first time this year, Chairman Jeffrey Immelt said in an interview before the conglomerate's annual meeting.Ford's North American automotive operations continued to suffer losses, but other key units, including Ford Europe, posted profits. Notably, the company's Premier Automotive Group posted a record $402 million pretax profit in the quarter.The North American Automotive unit posted a pretax loss of $614 million, versus a loss of...

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Freight Slowdown Hitting Transportation Companies

From the WSJ:In addition to UPS's profit decline of 14%, railroad operator Norfolk Southern Corp. said its first-quarter profit fell 6.6%, hurt by continued weakness in the automotive and housing sectors. Trucking carrier Arkansas Best Corp., Fort Smith, Ark., saw its profit shrink by 22%, but said a cost-cutting program begun last fall helped it offset...

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It's a Wash

From the Street.com."Are stocks going up or is the measuring stick going down?" asks Jeffrey Saut, chief investment strategist at Raymond James. The Dollar Index has lost over 33% since its peak in January 2002, he writes, while the Dow has rallied about 30% in the same peri...

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More Signs of International Strength Helping the US

From Bloomberg: Sales in Latin America, where Colgate has almost three- quarters of the toothpaste market, rose 14 percent. Colgate- Palmolive, which also makes Science Diet pet foods and Irish Spring soap, boosted advertising spending 20 percent, helping revenue increase the most in at least nine years.``The Latin American piece is the growth driver of the company,'' said Christopher Meeker, who helps manage $560 million at Farr Miller & Washington LLC, including Colgate shares. This type of earnings announcement has been very common this...

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The Beige Book

The Fed released the Beige Book today.Most parts of the country logged moderate economic growth in the early spring, despite sluggish manufacturing largely due to the housing slump.The fresh snapshot of the national economy, released Wednesday by the Federal Reserve, found that "manufacturing activity was slow" in many areas and that "residential real estate activity continued to weaken, with sales declining in many districts and flat in a number of others."Here's a link to the full report.Here are some relevant bullet points from the report (in...

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Gas Prices Decrease

From This Week in PetroleumGasoline saw a slight decrease for the week of April 23, 2007, falling 0.7 cent to 286.9 cents per gallon. Prices are 4.5 cents per gallon lower than at this time last year. East Coast prices were down 0.4 cent to 283.5 cents per gallon. The Midwest saw prices fall 3.2 cents to 277.5 cents per gallon. Prices for the Gulf...

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Will Construction Employment Lead to Recession?

For the last year or so, the blog Calculated risk has been discussing the effect of the housing slowdown on construction employment. His central argument is that as housing slows, construction employment will follow. Here is his explanation of the following graph linking housing and construction employment.This graph shows starts, completions and...

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New Home Sales Increase 2.6%

From Marketwatch:Boosted by warmer weather in the Northeast and Midwest, sales of new homes increased by 2.6% in March to a seasonally adjusted annual rate of 858,000, the Commerce Department reported Wednesday.Sales of new homes were off 23.5% compared with March 2006.The inventory of unsold homes rose by 1,000 to 545,000 in March, representing a 7.8-month supply. The inventory is down 1.4% compared with a year earlier, the biggest year-over-year decline ever recorded.The median sales price rose 6.4% year-over-year to $254,000, as luxury homes...

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Durable Goods Orders Rise

From the Census Bureau:New orders for manufactured durable goods in March increased $7.1 billion or 3.4 percent to $214.9 billion, the U.S. Census Bureau announced today. This was the fourth increase in the last five months and followed a 2.4 percent February increase. Excluding transportation, new orders increased 1.5 percent. Excluding defense, new...

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More Signs of International Strength Helping the US

From the WSJ:PepsiCo Chief Executive Indra Nooyi said the company's international business "performed well on virtually every dimension." "Volume gains in snacks and beverages were broad-based, operating margins expanded and growth was balanced across developed and emerging markets," said Ms. Nooyi. "Our business momentum is strong coming out of the first quarter, which increases our confidence in the full-year outlook."Revenue at PepsiCo's international division rose to $2.25 billion from $1.89 billion. Its Quaker Foods North America unit saw...

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The Phone In Rip Off

The poor old consumer has to be ever more vigilant these days, guarding himself/herself against rip offs and unnecessary products/services being foisted upon him/her by unscrupulous and dishonest individuals/companies.Aside form the myriad of companies pushing loans with excessive interest rates, unnecessary PPI products and "ambulance" chasing lawyers it is now revealed that the phone in competitions run by our "trusted" media organisations are in fact rip offs.This should come as no surprise to anyone, given the extortionate fees being charged...

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More Signs of International Strength Helping the US

Whirlpool's earnings announcement:Whirlpool Corp. shares jumped as much as 17% to a record high on Tuesday after the appliance giant said last year's Maytag acquisition along with strong international demand boosted first-quarter revenue......"As expected, higher material costs and significantly lower demand in the U.S. negatively impacted our first-quarter results," said Chairman and CEO Jeff Fettig in a statement. "The global environment is progressing as planned and we continue to expect lower industry demand in the U.S. through the first half...

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Volume Issue?

There's been a fair amount of talk about "decreasing volume" in the market. I don't see that as the problem with the SPYs and IWNs. I do see it possibly with the QQQQs. Here are the charts of the SPY, QQQQ and IWN with an exaggerated volume display. The horizontal line is a simple eyeballing of the recent rally's volume level with other volume...

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Violence In Another Country's Oil Fields

From Bloomberg:The Ogaden National Liberation Front, a rebel group demanding an independent state within Ethiopia, claimed responsibility for an attack on a Chinese-run oil field that left 74 people dead, the African nation said.``The attack has killed 74 people and seven more workers have been kidnapped'' from the field near the town of Abole, which lies in the east of Ethiopia near the border with Somalia, Bereket Simon, an aide to Ethiopian President Meles Zenawi, said in an interview from Addis Ababa today.Nine Chinese workers were killed and...

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Flight to Quality Underway, pt. II

From the MarketBeat Blog of the WSJ:But in all of 2007 so far, the biggest contributors to the S&P 500’s rally include just one company with a $150 billion market cap or more, AT&T. The megacap advances in April suggest a flight to safety — investors more willing to bet on global conglomerates — while the lack of broader market gains suggests...

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Existing Home Sales Drop 8.4%

From CBSMarketwatchSales of existing homes plunged 8.4% in March to a seasonally adjusted annual rate of 6.12 million, the lowest in nearly four years, the National Association of Realtors reported Tuesday. It was the largest percentage decline in sales since January 1989. Economists were expecting sales to fall to 6.45 million. The median price of an existing home fell 0.3% year-over-year to $217,000. The inventory of unsold homes on the market fell 1.6% to 3.75 million, representing a 7.3-month supply. Sales of condos were unchanged, while sales...

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Living Beyond Our Means

Those of you who are yet to be convinced that we as a nation are living beyond our means, should read the Spring forecast presented by the Ernst & Young ITEM Club.The report starts out optimistically enough, predicting growth of 2.9 % GDP for 2007 and noting that a rapidly expanding business sector is now driving UK economic growth faster than household or government spending. However, ITEM then goes on to note that as a nation we are far too relaxed about risk, inflating assets and the costs of borrowing (as a result of the "benign" economic...

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Business Economists More Pessimistic

From the WSJ:The National Association for Business Economics industry demand index fell 20 points during the first quarter to 20, indicating much softer demand growth versus previous months.The quarterly index, based on a survey of 107 NABE members about conditions at their firms or industries, is calculated by subtracting the percentage of respondents...

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Toyota Now the Largest Auto Company

From the WSJ:TOKYO -- Toyota Motor Corp. surpassed General Motors Corp. in quarterly sales for the first time, making it the world's biggest auto maker.Toyota sold 2.348 million vehicles world-wide in the January to March period, topping the 2.26 million vehicles that GM sold in the same three-month period. GM has been the world's No. 1 auto maker for more than 70 years.While the sales figures released Tuesday are only quarterly results, they represent the first time Toyota has surpassed GM in global sales. Analysts say it is just a matter of time...

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Oil Prices Increase On Nigerian Situation

From BloombergCrude oil surged, approaching $66 a barrel in New York, on concern shipments from Nigeria may be disrupted as complaints about the country's presidential election spawn more violence.Nigeria is counting votes after the April 21 poll that observers said was marred by fraud. Militant attacks have already cut about a quarter of Nigeria's...

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More Signs of International Strength Helping the US

From IBDThis is an article talking about the airline industry. Although there is concern about weakening domestic demand, international demand is helping to soften the blow to earnings.Analysts say weaker domestic demand would hurt Southwest more than other airlines since it has the most U.S. flights. Also, Southwest's large fuel hedges are wearing off.Meantime, it's boom time on the international front, where demand, load factors and pricing remain strong. Most low-cost carriers don't fly these lucrative routes, but the legacy carriers are adding...

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Big Drug Stocks Shine last Week

From IBD:On Friday, the 79 stocks in IBD's ethical drugs group rose to their highest level since November 2000. The group has been on a general uptrend since July, though increases have become sharper the last month.Last week's surge was largely the result of better-than-expected quarterly results, even as many top players continue to grapple with...

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Tamil Tigers Target Petrol Stations

Those of you who use credit/debit cards to buy your petrol (ie all motorists) should be on your guard.It seems that there is an international credit/debit card scam being perpetrated by criminals with links to the Tamil Tigers, the victims being motorists who buy their petrol via credit/debit cards.The victims' bank details are being skimmed, and the card details and Pin numbers are then used to withdraw money from customer accounts. It is estimated that approximately 200 of the UK's 9,500 petrol stations have been targeted. Police are investigating...

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Truck Tonnage 1.6% Higher in March

From the American Trucking AssociationThe American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.6 percent in February after falling a revised 3.1 percent in January. On a seasonally adjusted basis, the tonnage index improved to 113.3 (2000 = 100) in February from 111.5 the previous month. The index decreased...

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Will The Rest of the World Bail the US Out?

There is growing talk about the possibility of international economies preventing a collapse of the US economy. On Friday I posted this article where I noted that large US companies are reporting weak US sales but strong international sales. The Big Picture quoted this point from this weekend's Barron's (subscription required):THE REST OF THE WORLD IS CARRYING THE U.S. STOCK MARKET. Fast-galloping overseas economies, flush world capital markets and a sagging dollar fatten multinationals' earnings and furnish the fuel for commodity-related...

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Bull v Bear -- The Final Round

The arguments between the bulls and the bears in the current market has one interesting twist: both are shaving off pieces of the economy and ignoring the rest. The bears for focusing on housing and capital spending while ignoring the employment and wage situation. In contrast the bulls are focusing on employment and wage gains without taking full stock of the housing problems -- or in the least arguing that housing won't spill over because it hasn't yet.However, I think the bulls have a stronger argument for now simply because they are already...

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The Bull Argument

Below I express what appears to be the bear's main line of arguments. Here is how the bulls are looking at things.While GDP growth is slowing, the elements causing the slowdown are contained. The housing slowdown had not severely impacted consumer spending. While personal consumption expenditures slowed in the second and third quarter of 2006 to 2.6% and 2.8% respectively, they accelerated to 4.2% in the 4th quarter. The main reason for this increase is solid job growth leading to increased disposable income. According to the Bureau of Labor...

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Liquidity Fueling the Markets

This chart is from a site called Shadow Government Statistics. I can't speak to the veracity of their computations. However, if the chart below is correct -- or even in the ballpark -- we could have an answer for the bull mark...

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The Bear Argument

I admit it: the current rally is perplexing to me. In an attempt to try and figure out what exactly is going on I'm going to present what I see as the bull and bear market arguments to see which makes the most sense.The Bear MarketGDP growth is declining. According to the Bureau of Economic Analysis GDP growth for the last three quarters was 2.6%, 2% and 2.5%. Gross Private Domestic Investment was the primary reason for th decline. Residential investment has dropped 11.1%, 18.7% and 19.8% for the last three quarters. While nonresidential investment...

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Will International Sales Prevent a Bear Market?

There are a lot of earnings reports coming out right now, and there seems to be a common theme. The US economy is weak, but international sales are keeping earnings going. Just below this article I posted points from Caterpillar's report that showed a big drop in US sales but strong international growth. While McDonald's saw solid US growth, they also had good numbers from international sales. Europe also delivered strong growth in the first quarter, fueled by robust same-restaurant sales across the segment.Quarterly performance in the Asia/Pacific,...

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How Strong is The US Economy

From CBS Marketwatch. This is from a report on Caterpillar's earnings release."In North America, sales volume was down significantly from a year earlier," a company statement said. The negative aspects of the quarter included a "significant" decline in housing construction, a slowdown in nonresidential construction and a decline in coal production."The steep drop in housing construction continued to depress sales, particularly of smaller machines, as home contractors retrenched. ...Coal mining had a bad first quarter."North American machinery...

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The Markets Last Week

What an odd assortment of weekly charts we have.The SPYs and QQQQs had a hard time gaining any traction until today (Friday) -- they basically meandered between bulls and bears with no sense of direction. However today they opened higher and basically kept in that position. The QQQQs sold off a bit, but not so much as to endanger the rally.The IWNs...

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Dollar Update

Here is a weekly chart from Stockcharts.Notice the following.1.) The dollar has broken through support and is now trying to find a new low.2.) The downtrend started in early 2006 is still intact.3.) The 20, 50 and 200 day SMAs are all heading lower.In short, there is not one bullish element on this chart.The underlying fundamentals are still bearish....

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Oil Market Update

Here's a chart from Stockcharts. Notice the following points.1.) The uptrend started in mid-January is still intact. 2.) The average is still above the support line drawn from mid-December to early March. This is the neckline of a head and shoulders pattern. Prices are just above this line right now, so we'll have to see how the average reacts...

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British Gas Lambasted

British Gas has been lambasted by Energywatch, which has reported that the number of complaints from customers have more than doubled in a year.As from October 2006 to March 2007, British Gas had 21,427 complaints mainly concerning disputes over bills.The total number of complaints and enquiries from British Gas customers hit a stonking 14,001 in March.Ironically, although British Gas has around 30% of the market, it has over 70% of the total complaints in the industry.Well done British Gas!Seemingly, according to British Gas, the problems are...

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Two Manufacturing Reports Show Slow Growth

I missed the NY Fed's manufacturing survey on Monday. Here's the main point of the report:The Empire State Manufacturing Survey indicates that conditions for New York manufacturers were flat again in April. The general business conditions index edged up 2 points, to 3.8, rebounding only marginally from March.New orders were just above 0. Shipments dropped. Here's some bad news for the Fed. Prices paid increased while prices received dropped slightly. The prices received index has dropped for three-straight months. This may indicate producers...

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Flight to Quality Underway?

Below are three charts for the Utilities, Healthcare and Consumer Staples ETFs. The charts are for the price performance year to date. Notice how they have all done well this year.Is this the beginning of a flight to safety? It sure looks like ...

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DR Horton's earnings drop 85%

From Reuter's: D.R. Horton Inc. (NYSE:DHI - News), the largest U.S. home builder, said on Thursday quarterly earnings fell 85 percent, in part due to charges related to the lower value of land......For the fiscal second quarter that ended March 31, D.R. Horton earned $51.7 million, or 16 cents per share, down from $352.8 million, or $1.11 per share, a year earlier.The results included charges totaling $81.2 million, or 16 cents per share for land options forfeited and for the lower value of inventory of land and houses it owns."We believe that...

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A Deeper Look at Retail Sales

The following is from the comments section and frankly needs no further explanation.Here’s the Shoppertrak monthly Year-over-Year data beginning Thanksgiving 2006:Monthly data: sales/foot trafficHoliday season: +5.0%/-1.7%January: +4.9%/-3.9%February: +4.3%/-4.9%March: +2.7%/+2.9%The weekly data has to be treated as noise, there is too much variability in volume in this weighted index.The months’ sales and traffic tell a more interesting story. First, notice how each successive month is increasing less over last year’s numbers. In the case of March,...

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Foreclosures Increasing

From IBDHome foreclosures rose 7% in March to 149,150, RealtyTrac said. The figure, which includes default notices, auction sale notices and bank repossessions, was up 47% vs. a year ago. It comes as the gov't urges lenders to try to rework troubled subprime loans. Also, mortgage applications fell 2.5% last week as rates rose again. Rates have retreated this week.I will continue to make this observation: we are in an economic expansion. Foreclosures should increase during a recession or just after a recession. If we have a recession we're in...

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US PC sales "sluggish"

From IBD:The April index reading is almost 20% below the year-ago figure, and is 21% below the 12-month average.Worse yet for the major PC makers — including Dell, (DELL) Hewlett-Packard, (HPQ) Apple (AAPL) and Gateway (GTW) — demand among some key customer groups has plummeted.Planned PC purchases among parents sunk 32% in April from March. The purchase intent score for parents is at its lowest level since TechnoMetrica started measuring home PC purchase intent in April 2002.Also hitting new lows for PC purchase intent were households with incomes...

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Consumers Encouraged To Litigate

The Office of Fair Trading (OFT) has decided to encourage consumers, who have been cheated, to litigate against the miscreants.The OFT has stated that it believes that the public should have wider access to litigation, if they have bought goods from companies that operated cartels or otherwise colluded to fix prices. The OFT has also committed to becoming more proactive in helping consumers bring private claims. Lat year consumers were given the right to sue companies that have engaged in anti-competitive. However, the costs of mounting such a...

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Gas Prices Are Still Rising

From This Week in PetroleumFor the eleventh consecutive week, gasoline prices increased, climbing 7.4 cents to 287.6 cents per gallon for the week of April 16, 2007. Prices are now 9.3 cents per gallon higher than at this time last year. All regions reported higher prices. East Coast prices were up 8.4 cents to 283.9 cents per gallon. The Midwest saw...

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What Percentage Subprime?

This chart is from the WSJ's Marketbeat blog. Notice the large percentage of loans written last year to either subprime borrowers or second homebuyers.I'm not saying this is good or bad. What I am saying is it seems like a fair amount of mortgage loans were made to people who either had questionable credit or already had a ho...

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