Monday, February 18, 2008
Pay Day!!
After a fairly excitable Wednesday and Thursday I was just very glad to take my profits. To be honest earning a $1.00 for four days work was not bad at all!!
Anyway back to the markets and we saw our now customary up and down day Friday last. The Dow fell 28.77 points to close at 12,348.21. The SPX was able to add 1.13 points to closing at 1,349.99. It should be noted for most of the day the markets were well down for most of the day.
This is even more remarkable when you consider the poor economic news which came out Friday which was accompanied by an earnings warning from retailer Best Buy (BBY). Economic data included reports on consumer sentiment, industrial production, import prices and the Empire State Mfg. Survey.
The fact is that the Fed has been very concerned with economic slowing, putting pricing pressures on the back burner. However, Fridays data raised concerns about inflation even while providing weak results about economic growth. This means stagflation talk has returned despite Fed Chairman Bernanke’s comments yesterday that inflation remains anchored.
Import prices rose 1.7 percent during January, easily surpassing estimates for growth of 0.5 percent. This puts the year on year growth rate at 13.7 percent, its largest increase in 25 years!! Even excluding energy prices (and why not, we live in a world after all where we don't use petrol), the year on year rate remained high at 3.6 percent, its highest since the mid-1990’s. The fact that inflation expectations from consumers rose 3-tenths to 3.7 percent was another inflationary reading out this morning.
With inflation expectations rising and the economy slowing, consumer sentiment fell sharply as measured by the February mid-month reading. The index fell to 69.6, down from 78.4 in January and well below expectations for a reading closer to 77.0. The concern is that when sentiment declines it can easily result in falling consumer spending.
Industrial production rose 0.1 percent in January, matching expectations, but the year on year growth rate is up just 2.3 percent. At the same time, the Empire State Mfg. report showed a sharp decline in business activity in the New York region. This index fell to a reading of -11.7 from 9.0 in January. A reading below zero is considered a state of contraction, yet the prices paid component continued to rise, up 7.0 points to 47.4.
All in all this was not good news yet the markets did come off their lows.
As for the week ahead, well today Monday the markets are shut for President's day. Tomorrow we have Wal Mart's results which are an unofficial reading on the spending habits of the US consumer.
For the rest of the week we see big reports on Wednesday and Thursday with CPI figures and Producer prices. If either of these reports point to high inflation then watch out below.
As for our next play we again need to be mindful of the next Fed meeting on 18 March 2008 which comes two days before the March expiration cycle. We will be waiting to see what is out there over the next few days.
Until next time.
Anyway back to the markets and we saw our now customary up and down day Friday last. The Dow fell 28.77 points to close at 12,348.21. The SPX was able to add 1.13 points to closing at 1,349.99. It should be noted for most of the day the markets were well down for most of the day.
This is even more remarkable when you consider the poor economic news which came out Friday which was accompanied by an earnings warning from retailer Best Buy (BBY). Economic data included reports on consumer sentiment, industrial production, import prices and the Empire State Mfg. Survey.
The fact is that the Fed has been very concerned with economic slowing, putting pricing pressures on the back burner. However, Fridays data raised concerns about inflation even while providing weak results about economic growth. This means stagflation talk has returned despite Fed Chairman Bernanke’s comments yesterday that inflation remains anchored.
Import prices rose 1.7 percent during January, easily surpassing estimates for growth of 0.5 percent. This puts the year on year growth rate at 13.7 percent, its largest increase in 25 years!! Even excluding energy prices (and why not, we live in a world after all where we don't use petrol), the year on year rate remained high at 3.6 percent, its highest since the mid-1990’s. The fact that inflation expectations from consumers rose 3-tenths to 3.7 percent was another inflationary reading out this morning.
With inflation expectations rising and the economy slowing, consumer sentiment fell sharply as measured by the February mid-month reading. The index fell to 69.6, down from 78.4 in January and well below expectations for a reading closer to 77.0. The concern is that when sentiment declines it can easily result in falling consumer spending.
Industrial production rose 0.1 percent in January, matching expectations, but the year on year growth rate is up just 2.3 percent. At the same time, the Empire State Mfg. report showed a sharp decline in business activity in the New York region. This index fell to a reading of -11.7 from 9.0 in January. A reading below zero is considered a state of contraction, yet the prices paid component continued to rise, up 7.0 points to 47.4.
All in all this was not good news yet the markets did come off their lows.
As for the week ahead, well today Monday the markets are shut for President's day. Tomorrow we have Wal Mart's results which are an unofficial reading on the spending habits of the US consumer.
For the rest of the week we see big reports on Wednesday and Thursday with CPI figures and Producer prices. If either of these reports point to high inflation then watch out below.
As for our next play we again need to be mindful of the next Fed meeting on 18 March 2008 which comes two days before the March expiration cycle. We will be waiting to see what is out there over the next few days.
Until next time.
# posted by Paul @ 8:33 AM 
