Commodity prices bottomed near the end of 2015. After briefly turning negative, metals surged higher since the election, but have backed off a little in the last few weeks.
Stock prices S&P 500
- Down -0.3% w/w to 2355.54
Stock prices are positive, having made a string of new all-time highs beginning last summer.
Regional Fed New Orders Indexes
(*indicates report this week)(No reports this week)
- Empire State +7.8 to +21.3
- Philly up +1 to +39
- Richmond up +2 to +26
- Kansas City up +12 to +38
- Dallas down -2.1 to +9.5
- Month over month rolling average: unchanged at +27 (2+ year high)
The regional average has been more volatile than the ISM manufacturing index, but has accurately forecast its month over month direction. These continue to scream positive.
Initial jobless claims
- 234,000 down -24,000
- 4 week average 250,000 up +9,750
Initial claims remain well within the range of a normal economic expansion, as does the 4 week average.
The American Staffing Association Index
- Unchanged at 93 w/w
- Up +2.27 YoY
This index turned negative in May 2015, getting as bad as -4.30% late that year. In 2016 it became progressively "less bad," turning generally neutral since last May, and has now been positive for over the last three months.
- $234.9 B for the month of March vs. $216.7 B one year ago, up +$18.2 B or +8.4%
- $205.6 B for the last 20 reporting days vs. $193.2 one year ago, up +$12.4 B or +6.4%
Beginning with the last half of 2014, virtually all readings were positive, but turned more mixed and choppy, and occasionally even negative, in last 2015 through the first part of 2016. The last few months have with brief exceptions showed a marked improvement.
Oil prices and usage
- Oil up +$1,40 to $52.25 w/w, up +$7.47 YoY
- Gas prices up +$0.05 to $2.36 w/w, up +$0.28 YoY
- Usage 4 week average down -0.6% YoY
The price of gas bottomed over one year ago at $1.69. Prices went sideways since late last summer, then briefly moved higher making them neutrals, before easing in the last few weeks. Usage faltered and has now turned negative for several months. Historically, it has taken at least a 40% increase YoY for gas to turn into a headwind. We got close a few weeks ago, but the YoY change in gas prices is back below 20% now.
Bank lending rates
Both TED and LIBOR rose since the beginning of last year to the point where both were usually negatives, although there were some wild fluctuations. Of importance is that TED was above 0.50 before both the 2001 and 2008 recessions. The TED spread has turned very positive for the last several months. Meanwhile LIBOR has turned more and more negative. I am at a loss as to why the two lending measures have diverged so sharply.
- Johnson Redbook up +1.3% YoY
- Goldman Sachs/Retail Economist down -1.7% w/w, up +0.3% YoY
- Gallup daily consumer spending 14 day average $103, up +$9 YoY
Both the Goldman Sachs and Johnson Redbook Indexes progressively weakened in pulses during 2015, before improving somewhat in 2016. This week Redbook was positive, while Goldman was just barely above negative. Meanwhile for over two months Gallup has absolutely screamed higher, and remained very positive this week. I strongly suspect that the weakness in the first two measures is due to the impact of online shopping, whereas Gallup's consumer self-reports are not affected by this at all.
- Carloads up +9.1% YoY
- loads ex-coal up +2.9% YoY
- Intermodal units up +5.5% YoY
- Total loads up +7.2% YoY
Rail turned negative in 2015 and fell even more sharply in spring 2016. Since last June, rail improved to neutral, and then positive almost all weeks since the beginning of November. It was very positive again this week.
Harpex recently declined to repeated multi-year lows, but in the last two months has come back, strongly so in the last four weeks, enough so that it is now higher than during 4 of the last 5 years. BDI recently turned very positive before declining several month ago, but has now also surged back to being a positive. I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.
- Down -1.9% w/w
- Up +0.4% YoY
Until spring 2014, steel production had generally been in a decelerating uptrend. It then gradually rolled over and got progressively worse in pulses through the end of 2015. It improved from negative to "less bad" to positive in 2016 and except for one recent week remained positive since. This week it was weak enough to again score neutral.
Negatives remain few and far between, once again only 4: mortgage refinancing, gas usage, LIBOR, and the US$ against major currencies. There were a few more neutrals. Everything else was positive.
Among long leading indicators, Treasuries, corporate bonds, and mortgage rates remain neutral. The yield curve and money supply remain positive. Purchase mortgage applications remain positive, but refinance mortgage applications are still dead. Growth in real estate loans remains neutral.
Short leading indicators, including stock prices, jobless claims, industrial commodities, the regional Fed new orders indexes, spreads, temp staffing, and oil and gas prices are all positive. The US$ is neutral against all currencies and negative against major currencies. Gas usage remains negative.
The coincident indicators are generally positive. Two measures of consumer spending, rail, the TED spread, and the BDI are all positive, joined this week by the Harpex shipping index as well. The only negative is LIBOR, while the Goldman Sachs measure of consumer spending was just barely above negative. I am really at a loss as to why the TED spread and LIBOR have diverged so sharply over the last several months.
You can always find at least one sector that looks bad. One year ago it was manufacturing. Now it is brick and mortar retail sales. But the vast majority of indicators demonstrate that the outlook over the next 6 to 8 months remains very positive. The outlook for one year and further out remains generally neutral with a slight positive tilt.
Have a nice weekend!