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Real Time Insight

 

It’s a busy day for U.S. data today and so far the readings are “OK,” but after several large “bellwether” companies warned of weak sales this week, should be take these economic numbers be taken with a grain of salt?

We have all been following the relatively positive trends in jobs.  ADP and BLS both had strong showings in February and trends have been stable.  BLS showed the U.S. has added an average of more than 200,000 jobs a month in the past four months.

ADP trends have also shown consistent growth.  If you include revisions, this is the 9th month the ADP report has beat consensus estimates, averaging 180,000 jobs per month.

The low weekly jobless claim filings have been supporting those reports and this week we continued to stay the course. 

Initial jobless claims rose by 2,000 to a seasonally adjusted 336,000 in the week ended March 16.  Estimates were for claims to rise to 340,000 from a revised 334,000 in the prior week.

The four week average of new claims declined by 7,500 to 339,750; the lowest level since February 2008.

In fact, claims have been below 350,000 for five of the past six weeks.  The last time that streak occurred was in late 2007, just before the Great Recession began.

On the housing front, sales and prices have been stable, but not earth shattering.  S&P Case Shiller recently warned that the longer term outlook is still foggy.

This morning, the Federal Housing Finance Agency reported home prices climbed a seasonally adjusted 0.6% in January, and increased 6.5% from the same period in the prior year.  The data is compiled using only mortgages backed by Fannie Mae and Freddie Mac.

Lastly we saw Flash PMI come in just short of analyst expectations for 55.1, with a reading of 54.9.  Flash PMI readings have been declining over the last three months, but still show moderate expansion.

Does it matter?

I am on board with the “stall speed” recovery, and the Fed driven market rally.  But when companies like FedEx, Caterpillar, Cintas and even Oracle offer dismal sales and slash forecasts; one has to wonder about the real state of things. Doesn't it all come back to earnings at some point?

Surveys and samples can be deceiving and often have large margins of error, but when companies like FedEx or Caterpillar report real, major declines in sales and slash guidance, I pay closer attention.

Do you think they are anomalies?

Personally, I don’t feel as though earnings momentum has been very strong (perhaps non-existent is more apropos) nor do I feel comfortable that the aforementioned companies are issuing poor guidance from already lowered expectations.

I think the mediocre data will not be enough to support the markets during the next earnings season and the warnings we saw a sprinkle of will become more prevalent and turn this euphoric market lower.

**There will be exceptions of course

What are your thoughts?

Do you think that overall data is just fine?

Were those warnings from FedEx, Cat, Cintas and others just anomalies in an otherwise healthy market?

Do you think earnings will indeed be strong in Q1?

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