Hints That Market May Be Reaching Top

I couldn't help noticing this morning that these two headlines hinted at a potential for the current asset markets to be reaching their zeniths. I also noticed another headline, which is not posted here, that real estate refinance loans are sliding downward.

Do These Headlines Look Like a Healthy Economy to You?

Following a relentless barrage of recessionary industrial and manufacturing data, moments ago the Business Roundtable released its latest, fourth quarter 2015 CEO Economic Outlook Survey, and it is an absolute disaster.
According to the report, for the third quarter in a row, CEOs expressed growing caution about the U.S. economy’s near-term prospects and indicated they are moderating their plans for capital investment over the next six months, according to the Business Roundtable fourth quarter 2015 CEO Economic Outlook Survey, released today.

 ISM Manufacturing, a key manufacturing economic index has now fallen below 50 for the first time since Nov 2012, crashing to 48.6! This is the weakest since June 2009.

Today was the weakest PMI report since October 2013 (as ISM Manufacturing also dropped to its lowest since Dec 2012).

 

The chart above is the percent of stocks in the Gavekal Capital International DM Americas Index that are at least 10% off of their 200-day high. A stunning 55% of DM Americas stocks are at least 10% from their 200-day high while the DM Americas Index is hovering just below its all time high. That's startlingly concerning! 

Canadian GDP plunged 0.5% - its largest Month-over-Month drop since March 2009 and the biggest miss of expectations since Dec 2008. Good thing stocks are up 100 today, or we might have thought the economy was weakening!

Consumer Collapse

Stocks reversed, but probably only temporarily. Wall Street is having another Pollyanna Party.

from Zero Hedge:
August consumer confidence plummets from 59.2 to 44.2, far below consensus of 52, dropping to its lowest level since April 2009... And even uglier is the 6 month outlook chart which collapsed from 74.9 to 51.9, one of the biggest monthly drops in history.

Consumer Confidence "Deteriorated Sharply", Expected to Fall Further

Is it any wonder that stocks have stagnated today?

(Reuters) - Consumer confidence has fallen further after weeks of intensified economic concerns and broad stock market declines, and Conference Board data due later this month could be even weaker than current projections suggest, Consumer Edge Research said on Monday.
Readings from high, middle and low-income consumers all deteriorated sharply, due mainly to dramatic declines in outlook, the independent equity research firm said.
The firm's Consumer Economic Index is now at 45.4, down 10 percentage points from July and down 1.5 points from the 46.9 level it reported on August 10. Two days after that report, the Thomson Reuters/University of Michigan's preliminary August reading showed that U.S. consumer sentiment had fallen to its lowest point since May 1980.
The 45.4 reading is the lowest since Consumer Edge Research began its index in March 2010.
Consumer Edge Research forecast that the Conference Board's full-month Consumer Confidence Index would deteriorate 8 to 10 percentage points from an unadjusted 59.5 in July when its report is issued on August 30.
As of Friday, consensus was calling for a 2.5 percentage point decline, "so we believe there is downside risk to current expectations," Consumer Edge Research said.

Consumer Crashfidence; Lowest in 30 Years!

from Bloomberg:

Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.

from Tony Pallotta of Macrostory.com via Zero Hedge:


And that my friends is the nail in the economic "recovery." August consumer sentiment was just reported at 54.9 from 63.7 in July. This is the lowest level since May 1980. The chart below shows the correlation with sentiment and the consumer component of GDP which is about 70% of the economy and why I say the "recovery" is over.
In Q2 the consumer component of GDP was 0.07% from 1.46% in Q1. Based on historical correlations and today's sentiment data the Q3 consumer component will contract much further in the (2%) range. This will bleed into the fixed investment and inventory components of GDP causing further contraction.

But stocks are moderately higher.

It Gets Worse; Chicago PMI, Consumer Confidence Disappoint

from Zero Hedge:

The adverse data onslaught continues with both the Chicago PMI and the UMichigan Consumer Confidence numbers coming in weaker than expected. Chicago printed at 58.8 on expectations of 60.0, down from 61.1, while consumer confidence was quantified with laser-like precision by UMichigan at 63.7, below expectations of 64.0, and the lowest since March 2009. The data between the headlines was even uglier, as the Employment index in the PMI printed far lower, from 58.7 to 51.5, even as priced paid increased (yes, inflation) from 70.5 to 71.7, while new orders declined from 61.2 to 59.4. At the same time long-term inflation expectations are getting anchored ever higher, as the 5 year inflation rose from 2.8% to 2.9%, while the condition index plunged to 75.8, the lowest since November 2009. At least people's outlook on the future was unchanged at 56.0. Then again, all economic data is now irrelevant as everyone is preparing to listen to the Republicans, the president and the democrats in that order imminently.

Ugly Day for Trading!

from Zero Hedge:

Today's bad economic data trifecta is complete, with the UMichigan consumer confidence number plummeting to 63.8 from 71.5, and well below consensus of 72.2. The number is far below the lowest Wall Street prediction of 68 (upper end of range was 75) and the worst since March 2009. The good thing for the Fed's QE3 plans is that high future inflation expectations are getting unanchored, with 1 year expectations down from 3.8% to 3.4%, and 5 Year down to 2.8% from 3.0%. A little lower and it will be just right.

h/t John Lohman

Consumer Spending Weak

from AP:

WASHINGTON (AP) -- Americans spent at the weakest pace in 20 months, a sign that high gas prices are taking a toll on the economy.
Consumer spending was unchanged in May, the Commerce Department said Monday. That was the worst result since September 2009. And when adjusted for inflation, spending actually dropped 0.1 percent.
April's consumer spending figures were revised to show a similar decline when adjusting for inflation. It marked the first decline in inflation-adjusted spending since January 2010.
Incomes rose 0.3 percent for the second straight month. But adjusted for inflation, after-tax incomes increased only 0.1 percent in May, after falling by the same amount in the previous month.
Stock futures fell immediately after the report was released. Dow futures plunged 115 points.
Neil Dutta, an economist at Bank of America Merrill Lynch, pointed out that inflation-adjusted, after-tax income is now slightly lower than it was in January.
"It was a very poor report all around," he said. "I think it's clear that higher gasoline prices are taking a bite out of consumer spending."
Consumer spending accounts for 70 percent of economic activity. The spike in gas prices has forced many consumers to cut back on discretionary purchases, such as furniture and vacations, which help boost growth.
Fewer jobs and high unemployment have left workers with little leverage to ask for raises. And slow wage growth hurts the broader economy because consumers have less money to spend.
Hiring slowed considerably this spring after a strong start at the beginning of the year. The economy created only 54,000 jobs in May, the lowest amount in eight months. That followed three months in which employers hired an average of 220,000 net new workers each month. The unemployment rate rose to 9.1 percent last month.
The economy expanded at an annual rate of 1.9 percent in the January-March period. Many economists believe that growth is only slightly better in the current April-June period.
The report also showed that prices are increasing across many goods and services. A key inflation gauge followed by the Federal Reserve rose 0.2 percent in May, after increasing 0.3 percent or higher in each of the previous five months.
But excluding the volatile food and energy categories, inflation rose 0.3 percent in May, the most since October 2009.
Gas prices have eased since peaking in early May at a national average of nearly $4 per gallon. In the past two months they have dropped to a national average of $3.57 per gallon, according to AAA's daily fuel gauge.
An Associated Press survey of 38 top economists predicts that rate will be about 2.3 percent. Economists are optimistic for the second half of the year, saying growth should pick up to a 3.2 percent pace. They note that two of the biggest factors slowing the economy are abating.
Gas prices are falling. And U.S. factories are expected to begin producing more once Japan's factories resume more normal operations. The March 11 earthquake and tsunami in that country has led to a parts shortage, particularly for auto and electronics manufacturers.
Still, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.
Americans boosted their savings a bit in May, keeping 5 percent of their after-tax income. That is up from 4.9 percent in April.

Wall Street and Main Street Part Ways

from Bloomberg:

Main Street is out of step with Wall Street.
The Bloomberg Consumer Comfort Index has stalled near its recession average as the Dow Jones Industrial Average has risen 83 percent from a 12-year low in March 2009. A tight correlation between the index and Dow that lasted more than two decades has broken down as joblessness above 9 percent, stagnant wages and near $4-a-gallon gasoline outweigh the benefits of higher share prices, even after a 6.6 percent retreat in the Dow since the end of April.
“Consumers are fairly depressed, yet the stock market continues to improve,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an interview

Terrible Triple Trifecta!

And now, consumer confidence plunges also. May consumer confidence completed the terrible trifecta of bad news, coming at 60.8 on expectations of 65.4, and down from 66.6.

Consumer Confidence Takes a Hit

But Wall Street is oblivious:

thanks for Zero Hedge:

The Confidence Board has released its Consumer Confidence Number, which in March went in freefall from the revised previous print of 72, highest in 3 years, to a below consensus 63.4 (expectations of 65). But while this number is largely irrelevant, the Inflation Rate index surged from 5.5 to 6.7, the highest since October 2008.
The chart below of inflationary expectations shows why Bernanke is in a bind: QE3 means this line will go parabolic; no QE3 means the market will go inversely parabolic. Pick your poison.

And longer-term. There has been a market crash after every historic surge.

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The Confidence Board has released its Consumer Confidence Number, which in March went in freefall from the revised previous print of 72, highest in 3 years, to a below consensus 63.4 (expectations of 65). But while this number is largely irrelevant, the Inflation Rate index surged from 5.5 to 6.7, the highest since October 2008.

The chart below of inflationary expectations shows why Bernanke is in a bind: QE3 means this line will go parabolic; no QE3 means the market will go inversely parabolic. Pick your poison.

And longer-term. There has been a market crash after every historic surge.

Select ratingCancel ratingPoorOkayGoodGreatAwesome

Consumer Confidence: Not Just the Drop, But the Size of the Drop

from Zero Hedge:

While today's consumer confidence index missing expectations (at 67.5 or the lowest since April 2009) was not a big surprise following our prediction of just that happening when we reported that the Bloomberg Consumer Comfort index hit a 7 month low, what was very disappointing was that the Expectations component had its fifth largest drop in history, plunging from 72 to 58. This is a lower reading than that recorded when the "recession", according to the NBER at least, was still raging. As a reminder the recession ended with "expectations" at 70.

Consumer Sentiment Declines, Stocks Rise on Positive GDP, Earnings

Consumer sentiment in the U.S. dropped more than forecast in March, damped by higher gasoline costs and the effects of Japan’s natural disaster.
The Thomson Reuters/University of Michigan final index of consumer sentiment decreased to 67.5, the lowest level since November 2009, from 77.5 in February, the group said today. The median forecast of 67 economists surveyed by Bloomberg News projected a reading of 68.
Gasoline prices hovering near the highest levels since October 2008 are straining the finances of American households, whose spending makes up about 70 percent of the world’s largest economy. While unemployment has fallen for three months, Japan’s earthquake crisis led to a plunge in stock values, at one point wiping out all of 2011’s gains.
“Consumers are concerned about the rise in gasoline and food prices,” said Ward McCarthy, chief financial economist at Jefferies & Co. in New York who correctly forecast the drop. “People who are now shelling more money out of their pockets every time they fill the gas tank have a whole lot less left over for anything else they want to spend money on.”
Forecasts in the Bloomberg survey ranged from 65 to 71. A preliminary reading issued earlier this month was 68.2. The sentiment index averaged 89 in the five years leading up to the recession that began in December 2007.

Consumer Discomfort

"Consumer confidence in the U.S. fell last week to the lowest level since August as more Americans became despondent over the economy. The Bloomberg Consumer Comfort Index dropped to minus 48.9 in the period to March 20 from minus 48.5 the prior week. The measure of the current state of the economy slumped to a 15-month low."

But at least Wall Street is "confident"!

ABC Consumer Confidence Plunges

Once again the ABC Consumer Comfort index indicates that it is leaps and bounds more relevant than the ADP Private Payroll number. With increasingly less relevant confidence indicators out of UMichigan and the Conference Board, which lately only seem to "poll" 20 people with a $1MM+ Schwab trading account, it is worth noting what a true polling index says about the economy. And it isn't pretty: "Soaring gasoline prices slammed consumer sentiment into reverse this week, threatening the slow recovery in economic views that’s been under way. With gas now at record high for a February in Energy Department data back to 1990, the weekly Consumer Comfort Index dropped by an unusually steep 5 points to -46 on its scale of -100 to +100. It’s dropped that far only 36 times in more than 1,300 weeks of ongoing polling since late 1985; this shift erases an equally unusual 5-point gain in early January...After reaching -40 Jan. 9, the CCI is now at its low for the year, and its lowest since Nov. 21. It averaged -46 in 2010 and -48 in 2009; those compare with a lifetime average of -14 and a best-year +29 in 2000. Its single best week was +38 in January 2000; its worst, -54 in December 2008 and again in January 2009." So strange: unlike with stocks, where inflation is somehow supposed to raise confidence, inflation for the people somehow leads to a near record plunge in confidence. But who are we to believe in this centrally planned economy when every single data point is now fit to be discarded as nothing more than evidence of propaganda.
Charting the CCI:

And some more from ABC:

It’s likely no coincidence that the change in sentiment follows the federal government’s report yesterday that gas has jumped to an average $3.13 a gallon, up steadily from $2.74 six months ago, $2.65 a year ago and $1.89 two years ago this month.

The portent is not a good one. Gas prices tend to drop in winter, when demand is down, and rise in summer, when more Americans hit the road. Gas last approached this wintertime level in February 2008 – on its way to a record high of $4.11 the following July.

A repeat could be devastating to consumer sentiment.

We hope the Economy Ph.D.s from the "other two" indices read the following paragraph, as they seem to still be completely clueless about how the economy actually works:

Although the CCI and gas prices don’t always move in tandem, they’ve correlated significantly, at -.46, since 1990 (after detrending for time) – meaning that as gas prices go up, confidence tends to decline. And that relationship strengthens when fuel prices are rising: From February 2007 to July 2008, as gas soared from $2.19 to $4.11, the CCI tanked from  -1 to –41; the two correlated at a remarkable -.84.

That relationship suggests that confidence would be in a better place now were gas prices not rising – with this week’s CCI a warning siren for the slow, tentative recovery of late.

The following explains the Index' methodology:

The index, produced by Langer Research Associates, is based on Americans’ ratings of their personal finances, the buying climate and the national economy. Positive ratings of the buying climate and the economy took 3-point hits this week; 43 percent rate their finances positively and 25 percent call it a good time to buy, compared with long-term averages of 56 and 37 percent, respectively. Just 13 percent rate the national economy positively, 24 points below its average.

Among groups, the index dropped most sharply this week among singles, young adults – and among the wealthiest Americans, sliding into the negative zone in this customarily more positive group. They may be regretting those gas-guzzling SUVs.

Full report and associated data.

Spooked Market

NEW YORK (MarketWatch) -- U.S. stock losses deepened Friday, dragged lower by disappointment over Microsoft, Ford and Amazon earnings, and a drop in consumer sentiment...
U.S. stocks opened higher but lost gains shortly after a survey of consumer sentiment by the University of Michigan and Thomson Reuters showed individuals growing more pessimistic, largely due to rising food and fuel prices. Read more on consumer sentiment.
Gross domestic product, the broadest measure of all the goods and services produced, rose at an inflation-adjusted annual rate of 3.2% in the fourth quarter, the Commerce Department said in its first estimate of the economy’s benchmark indicator. It was below economists’s estimates for a 3.5% increase. Read more on gross domestic product.
Still, the rise takes total output to its highest level since the end of 2007, when the recession started. And for the first time in 2010, the economy also benefited from a trade surplus in October to December.
Consumer spending, accounting for about 70% of demand in the U.S. economy, rose at a 4.4% rate in the fourth quarter. That’s the fastest pace since the start of 2006 and double the average rise in spending in the previous three quarters of 2010.

Consumer Sentiment, Shiller Home Values Drop

Now that elections are in the past, reality sets in.

Consumer Confidence:

The Conference Board Consumer Confidence Index®, which had improved in November, decreased slightly in December. The Index now stands at 52.5 (1985=100), down from 54.3 in November. The Present Situation Index declined to 23.5 from 25.4. The Expectations Index decreased to 71.9 from 73.6 last month.

The Consumer Confidence Survey® is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world’s largest custom research company. The cutoff date for December’s preliminary results was December 20th.

Says Lynn Franco, Director of the Consumer Research Center at The Conference Board: "Despite this month's modest decline, consumer confidence is no worse off today than it was a year ago. Consumers' assessment of the current state of the economy and labor market remains tepid, and their outlook remains cautious. Thus, all signs continue to suggest that the economic expansion will continue well into 2011, but that the pace of growth will remain moderate."

Consumers' appraisal of present-day conditions was slightly more pessimistic than in November. The percentage of consumers claiming business conditions are "bad" decreased to 41.2 percent from 42.9 percent, however, those claiming business conditions are "good" declined to 7.5 percent from 8.5 percent. Consumers’ assessment of the labor market was less favorable than last month. Those saying jobs are "plentiful" decreased to 3.9 percent from 4.3 percent, while those stating jobs are "hard to get" edged up to 46.8 percent from 46.3 percent.

Consumers’ expectations were slightly less optimistic than in November. Those expecting an improvement in business conditions over the next six months edged up to 16.6 percent from 16.4 percent, while those anticipating business conditions will worsen edged down to 12.1 percent from 12.4 percent. Consumers remained mixed about future job prospects. Those anticipating fewer jobs in the months ahead increased to 19.5 percent from 19.1 percent, while those expecting more jobs declined to 14.3 percent from 15.1 percent. The proportion of consumers expecting an increase in their incomes decreased to 9.9 percent from 11.1 percent.

Case Shiller from Zero Hedge:

If Bernanke is hoping to eventually have restore HELOCs as a piggybank for the greater US population, he better come up with something quick. The Case Shiller for October, as always nearly three months delayed, shows that the double dip in home prices which started in June, is persisting. And since both new and mortgage refi apps have plunged in recent weeks following the spike in the 30 Year cash mortgage rate, do not expect to see any rise in Top 20 Composite MSA home prices. From the October print: the October SA Composite 20 came at 143.52%, a decline of 0.99% from September, and just down from a year earlier. There was a sequential decline in 18 of the 20 MSAs, with just Denver and DC posting an increase. The biggest drops were in Atlanta (-2.13%), Chicago (-1.80%), and Minneapolis (-1.76%). The decline was even worse on a non-seasonally adjusted basis, where the sequential decline in the Composite 20 was -1.32%. As the attached chart demonstrates, the double dip is accelerating, as the sequential drops are increasing in magnitude. This data flatly continues to refute claims that there is  any economic recovery going on, as the primary source of middle class wealth continues to decline in value.

Mixed News on Choppy Trading Sends Stocks Rocketing Higher

Significant drop in unemployment claims appears to be the main driver, but previous weeks' figures continue to be revised higher. All the other news is really awful. Home sales plunged and so did durable good orders. But consumer sentiment rose, perhaps due to the results of elections. Wall Street is thrilled on thin pre-holiday trading.

U Mich Consumer Sentiment Modest Disappointment

This disappointment has had virtually no effect on the market. This was the poorest showing in nearly a year -- November 2009.


from Fox Business:

U.S. consumer sentiment worsened more than expected in October, hitting its weakest level since November, with concern about the economy high leading into next week's election, a survey showed on Friday.

The Thomson Reuters/University of Michigan's final October reading on the overall index on consumer sentiment came in at 67.7, down from 68.2 in September and below the 68.0 median forecast among economists polled by Reuters.

Consumer Confidence Beats Expectations, Stocks Surge Temporarily

from Fox Business:

U.S. consumer confidence rose slightly in October but remained near historically low levels as concerns about the labor market persisted, according to a private sector report released on Tuesday.

The Conference Board, an industry group, said its index of consumer attitudes rose to 50.2 in October from a revised 48.6 in September.