Showing posts from May, 2020

Mixed Economic Reports Leaves Sentiment Unclear

Economic Report Monitor #33 May 27th, 2020 Stocks jump again on Wednesday as another busy day of economic reports brings along more information about the economic effects of the COVID-19 outbreak. Meanwhile, central banks continue their fight against those economic effects as the European Central Bank (ECB) announces a new stimulus package worth as much as 750 billion euros ($825 billion). The bank's president, Christine Lagarde, also announced today that they expect output to drop 8-12% in the Euro-area in 2020. The sentiment seems to disagree with the momentum seen in stocks recently as the financial situation screams for a reality check. MBA Mortgage Applications this week reflected the surprising new home sales number from yesterday. The Purchasing Index jumped 9.0%, building on a 6.0% gain the week before, to carry the Composite Index up 2.7%. The Refinancing Index stayed flat at -0.2% as no major move in interest rates inspired a shift in mortgage refinancing. So far, real e

Dallas Fed Survey Points to Less Economic Damage Than Expected

Economic Report Monitor #32 May 26th, 2020 An early week starts with a slew of economic indicators including some business activity surveys and real estate data releases. Stocks roared higher in the morning and throughout the day until the last two hours when some gains were lost. Overall, market technicals feel stronger after holding some key support lines this week. The COVID-19 crisis appears to be settling down, but uncertainties about reopening remain intact. Two business activity-based reports were released today from the Chicago and Dallas Feds. The Chicago Fed National Activity Index, which is still on its April issue, revealed a massive drop from -4.97 to -16.74. This index reading blows past lows seen in previous recessions in 2009, 2001, and even before that. Seventy-nine indicators were negative in April with massive drops in production and income-related and employment-related indicators. The largest blows came from a -11.2% drop in industrial production which lead pr

Unemployment Rate Surges to Highest on Record

Economic Report Monitor #31 May 8th, 2020 The first full week of May closes with the anticipated April employment situation report. The report was consistent with the ADP report with a decrease of 20.5 million jobs seen last month. The jobs lost forced the unemployment rate to increase at the highest rate ever to 14.7%, up 10.3%. As expected, the number of unemployed persons rose by 15.9 million as closures forced workers to stay home, but the amount of those reporting being only temporary laid off rose by 18.1 million, something positive to take from the report. Overall, only 544,000 more people reported being permanently laid off, a number that is small relative to the total jobs lost. A number of individuals also reported less hours instead of total job loss with about 5 million saying they "work part-time for economic reasons." Job losses were lead by the leisure and hospitality sector which saw 7.7 million jobs cut. Retail trade was a bit far behind, losing 2.1 m

Supplemental Employment Data Confirms Mass Layoffs

Economic Report Monitor #30 May 7th, 2020 After the APD employment report yesterday, some additional employment data was released before the market opened. Earliest was the Challenger Job Cut Report which produced what one would expect. April job cuts jumped 202% to 671,129 totaling 1,017,812 for the year. Of the cuts announced last month, 94% of those were specifically attributed to COVID-19. The sector breakdown is also pretty expected as the Entertainment/Leisure sector accounts for a large majority of the layoffs. Retail and Service sectors were not far off as a large amount of those stores are also designated non-essential. US Monthly Announced Job Cuts One sector that has not let closures affect the is the Education sector which has only seen layoffs increase from 7,069 in the first four months of 2019 to 9,808 in the first four months of 2020. A majority of schools in the United States running online with limited activity at campuses, but that hasn't forced the aca

April Job Losses Top 20 Million in Early ADP Employment Report

Economic Report Monitor #29 May 6th, 2020 The headline economic report today was the ADP National Employment report with the preview of the official Department of Labor. The headline data point reported a job loss of -20.2 million in April. As expected, a large amount of those jobs, over 16 million, fell off of the service sector. The two largest declines in the industry were leisure/hospitality, down -8.6 million, and trade/transportation/utilities, down -3.4 million. Nonessential closures and a slowdown in trade are most likely the blame there. Businesses of all sizes shrunk their workforces as well. Large companies shed the most at -9.0 million lost, and that was closely followed by -6.0 million. It's worth noting that -6.0 million in small business employment translates to a lot more businesses feeling pain and most likely shutting down. Larger corporations, like the public companies that have announced job cuts, are likely only seeing a sharp decrease in capacity utilizatio

Services Clobbered by Closures

Economic Report Monitor #28 May 5th, 2020 Advisor Perspectives Two days after IHS and ISM released reports on the weakening of manufacturing, the organizations have done the same for the service (and non-manufacturing) sector. The IHS Markit version of the report saw "unprecedented contractions in output, new business and employment" as the index fell from 39.8 in March to 26.7 in April. The reduction in the workforce was the largest seen in series history. However, there was a notable amount of responses that said they had furloughed workers instead of laying them off with hopes of improvement on the horizon. The drop in capacity in response to the drop in demand has lead to a drop in input costs as wages and commodity prices fell. As expected, face-to-face businesses felt the pain the most. The Insititute of Supply Management's (ISM) report saw similar pain with the index falling from 52.5 to 41.8 in April. Business activity fell -22.0 pts to 26.0, new or

New Orders and Investor Sentiment Cools

Economic Report Monitor #27 May 4th, 2020 Stocks continued the bearish fall on Friday at the start of the week as the COVID-19 infections stall at about 2-3% in the US. Along with only small signs of improvement, new factory orders data was released and continued to frame the economic slowdown. Manufacturers saw a drop of -10.3% in new orders as demand for durable goods crumbled. Declines in the industry were highest as transportation equipment, down -41.3%, dragged it down -14.7%. Other sizeable drops were seen in Primary metals, down -2.8%, and mining, oil field, and gas field machinery, down -7.2%. Shipments also fell -5.2% with transportation equipment and petroleum industries weighing down the overall index. The final indicator of the day was the Investor Movement Index from TD Ameritrade. In April, the index fell -6.25% to 3.9 as exposure to equity markets dropped. However, overall clients were net buyers for the 2nd month in a row. Buying was heaviest in weak sectors like I

Manufacturing Sours, Construction Spending Stable

Economic Report Monitor #26 May 1st, 2020 On the last day of the week, two PMIs from IHS Market and the Institute of Supply Management make their appearances. IHS's report on the manufacturing sector saw a drop from 48.5 to 36.1 in April, just above 2008-2009 levels. The figure was also slightly lower than the "flash" figure reported earlier this month. Output saw the steepest decline in the series history as domestic and foreign new orders plummeted. The excess capacity lead to employment falling to March 2009 levels. In another first, firms were pessimistic on outlook for the first time in the series history (since July 2012). The decline in employment also came with a decrease in firm buying activity resulting in input costs falling as well (this was also exacerbated by low commodity costs). The ISM Manufacturing Report on Business reported a 41.5 reading for April just 15 minutes after the IHS report. New orders, production, and employment all plummeted to just o