Thursday, February 21, 2019
This morning, we see three key reports of economic data for investors to mull over. Major U.S. indexes now have their eyes on a possible ninth straight week of closing in the green, but based on more speculation and hopefulness than actual statistics. (For more on this, read Zacks EVP Kevin Matras’ latest Profit from the Pros article here: Stocks Up Again, Could We See 9 Weeks In A Row?)
Being Thursday, we have new weekly Initial Jobless Claims, which came back down to medium-term levels consistent with an historically robust labor market: 216K claims for last week was much better than the unrevised 239K we had seen the previous week. For most of February, we’d seen these weekly jobless claims spike out of that 200-225K range we’d been enjoying, with perhaps the five-week partial U.S. government shutdown sending a higher portion of the overall workforce to the unemployment line.
Continuing Claims, which had ticked up to 1.78 million the previous week, dipped back down again to 1.725 million. Either one of these figures illustrates a healthy labor picture, though we had been looking at levels of repeat jobless claims sinking down toward the 1.6 million level a couple months ago. But any way you slice it, employment looks good.
A delayed release of December preliminary Durable Goods Orders also found its way out the door this morning, though results were lower than analysts were looking for: +1.2% on the headline, beneath the 1.5% expected. Revisions to November rose the headline number from +0.7% to 1.0%.
Breaking these numbers down a bit, this 1.2% number dwindles to +0.1% when subtracting from Transportation. Ex-Defense, it’s up to +1.8%. Capital Goods Orders (non-Defense, ex-aircraft) was the most disappointing figure of them all: -0.7%.
What we see here is some slippage in business investment, at least from a couple months ago. Although the historic corporate tax cut signed at the end of 2017 helped buoy robust labor market figures, the same can’t really be said for businesses using cash windfalls to spend on their infrastructure, in a general sense. Perhaps companies are awaiting a new level of functionality to arrive in the overall marketplace, such as 5G technology.
The worst number we saw come out this morning was from the February read from the Philly Fed survey: -4.1 was the headline for the index, far lower than the 14 analysts were expecting, and 17 in the January headline. This marks the weakest read for productivity out of the municipality of Philadelphia, PA (so consider region-oriented issues, which often present higher levels of volatility) since May, 2016. New orders and shipments were down in the month; perhaps this is somewhat in line with the Durable Goods disappointment.
Nothing dire to see in any of these figures; certainly there’s nothing a trade deal with China couldn’t fix. But it does speak to those predictions in the market that 2019’s domestic economy is expected to slow down relative to the previous year, when those corporate tax cuts took effect.
As government-issued economic reports catch up to real-time, hopefully we’ll see improvement on these matters. But with Europe continuing its slowdown and the China trade war not yet resolved, we might more accurately predict some further slowing. Will the stock market remain enthusiastic anyway?
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