If we include the downward revision to the March core durable goods orders number of 5 tenths, the April rise of 1% vs the estimate of up .7% has the data about as expected. Shipments did surprise to the upside so that could lead to a modest rise in Q2 GDP forecasts. I was expecting a bigger pick up in inventories as the threat of tariffs and capacity constraints …
Latest Data
Italian yields spiking again
The German IFO business confidence index for May was unchanged m/o/m at 102.2 and was about in line with the estimate of 102. This is though a one year low and follows 5 straight months of declines. The IFO said "The German economy is performing well in a difficult international situation." The standout in the German economy continues to be in construction where the …
Home sales
Existing home sales in April totaled 5.46mm annualized, about 100k less than expected and down from 5.6mm in March. As this measures closings, assume contracts were signed in the January thru March time frame. The average 30 yr mortgage rate started the year at 4.22% and ended March at 4.69%. The median home price rose 5.3% y/o/y and is approaching the record high …
Claims
Initial jobless claims totaled 234k, up 11k w/o/w and was 14k more than expected. The 4 week average rose to 220k from 214k which was the lowest since 1969. Continuing claims, delayed by a week, rose 29k after falling in the week prior by 82k to the lowest since 1973. Bottom line, claims came in at the highest in 7 weeks but still remain very modest with the 4 week …
Sentiment/EM/Europe/Trade
Yesterday II said that Bulls rose to 49.1 from 46.6. That is the most in a month. Bears fell a touch to 19.2 from 19.4 to a 6 week low. Those expecting a Correction is down to a 9 week low at 31.7. In today's AAII index of individual investor sentiment saw Bulls up for a 3rd week to 38.6 from 36.7 last week and that is a 13 week high. Bears were up too by 4.6 pts to …
Yes, the FOMC is made up of mostly doves
The FOMC minutes confirmed that a majority of the voting committee wants to hike two more times this year and the flexibility will be there if they want a 3rd. Unlikely I believe. Pointing AGAIN to their desire for a ‘gradual’ path, the minutes included this: “Participants generally agreed with the assessment that continuing to raise the target range for the federal …
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Housing, Services and Manufacturing
In April, new home sales totaled 662k, 18k less than expected. Also, March was revised down by 22k to 672k. As this data measures contract signings, it is a more up to date measure of the industry relative to existing homes (out tomorrow) which measures closings. The rise in mortgage rates, up now by 65 bps year to date to a 7 year high, are impacting behavior as to …
A lot of things going on
While the Turkish lira continues its free fall and is garnering major attention, I continue to focus on the market reaction to the new Italian government. Bond yields continue to blow out. After a 7 bps respite lower yesterday, the 2 yr yield is up 11 bps today at +.31%. It was -.31% 2 1/2 weeks ago. The 10 yr yield is spiking by .13% to 2.45%. It was 1.79% 2 1/2 …
Another mediocre auction
The 2 yr note auction was mixed again. The yield of 2.59% was a hair better than the when issued of 2.595%. The bid to cover of 2.88 was a touch above the one year average of 2.85. On the other hand, dealers got stuck with 45.4% of the auction, the most in any 2 yr auction since December 2017 and is the 2nd most since December 2016. Bottom line, here is another …
Italy/UK/China/Japan
After giving back 3 years of monetary suppression in 6 trading days, Italian yields are lower today. The 2 yr yield is down by 7 bps as is the 10 yr yield. Italy certainly has its own political dynamic and a debt to GDP ratio of 130% at the same time the new regime wants to bust out the deficit. But, the dramatic reaction in its bonds, the 3rd largest bond market in …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.