July 18, 2009 –
|
RELATED TICKERS: BAC
, GS
, C
The immortal words of Gomer Pyle rang out in financial headline after headline this week, "Surprise, Surprise, Surprise!"
First the banking sector became awash in surprisingly good news. Four of the US top banks smashed all earnings estimates and posted collective net profits of $13.6B for the second quarter.
Bank of America (BAC) posted a profit of $3.2B
Citigroup(C): $4.3B
Goldman Sachs (GS): $3.4B
JP Morgan Chase (JPM): $2.7B
The technology sector followed with Intel's surprise. It posted its best quarter over quarter sales increase since 1988. Further, the chip leader formally asserted that this current quarter ending in Sept, will be significantly stronger than any analysts had even dreamed of. IBM also added its vote of Q3 confidence later in the week.
And there was more surprisingly good news in the jobs data Thursday. The number of initial claims in the week ending July 11 fell 47,000 to 522,000 - the lowest level since early January. The data for continuing claims also fell by 642,000 -- the largest drop on record! This huge downward surprise even pulled the four-week moving average of these continuing unemployment claims down by 110,250.
And then on Friday, the housing market chimed in with surprises of its own. Contractors started building single-family homes at the fastest rate in 4-1/2 years. "The bond market was completely caught off guard by the increase in housing starts," said Jane Caron, chief economic strategist at Dwight Asset Management in Burlington VT.
And stocks surprised most strategists as well. Just last week many had forecast stocks to continue their recent declines (or at least continue to move sideways). Q2 earnings jitters dominated the news. But as markets closed on Friday, many traders were left scratching their heads as the Dow rocketed to its best weekly gain since March, closing within easy striking distance of the 9000 mark.
But perhaps the mother of all surprises this week came from the bear of all bears, Doctor Doom, Nouriel Roubini. Just last week the ultra depressing economic prognosticator wrote an article "Brown Manure, Not Green Shoots." But this week in a significant flip, flop, Roubini actually stated, "the worst of the worst is behind us." (He later of course whined that his words were taken out of context.)
Gomer Pyle frequently exasperated his immediate supervisor Sergeant Carter with the Private's Pollyanna-style demeanor. With positive economic surprises everywhere, it is no surprise that Roubini feels a bit frustrated as well. [more]
July 18, 2009 –
|
RELATED TICKERS: GS
, C
, BAC
The immortal words of Gomer Pyle rang out in financial headline after headline this week, "Surprise, Surprise, Surprise!"
First the banking sector became awash in surprisingly good news. Four of the US top banks smashed all earnings estimates and posted collective net profits of $13.6B for the second quarter.
Bank of America (BAC) posted a profit of $3.2B
Citigroup(C): $4.3B
Goldman Sachs (GS): $3.4B
JP Morgan Chase (JPM): $2.7B
The technology sector followed with Intel's surprise. It posted its best quarter over quarter sales increase since 1988. Further, the chip leader formally asserted that this current quarter ending in Sept, will be significantly stronger than any analysts had even dreamed of. IBM also added its vote of Q3 confidence later in the week.
And there was more surprisingly good news in the jobs data Thursday. The number of initial claims in the week ending July 11 fell 47,000 to 522,000 - the lowest level since early January. The data for continuing claims also fell by 642,000 -- the largest drop on record! This huge downward surprise even pulled the four-week moving average of these continuing unemployment claims down by 110,250.
And then on Friday, the housing market chimed in with surprises of its own. Contractors started building single-family homes at the fastest rate in 4-1/2 years. "The bond market was completely caught off guard by the increase in housing starts," said Jane Caron, chief economic strategist at Dwight Asset Management in Burlington VT.
And stocks surprised most strategists as well. Just last week many had forecast stocks to continue their recent declines (or at least continue to move sideways). Q2 earnings jitters dominated the news. But as markets closed on Friday, many traders were left scratching their heads as the Dow rocketed to its best weekly gain since March, closing within easy striking distance of the 9000 mark.
But perhaps the mother of all surprises this week came from the bear of all bears, Doctor Doom, Nouriel Roubini. Just last week the ultra depressing economic prognosticator wrote an article "Brown Manure, Not Green Shoots." But this week in a significant flip, flop, Roubini actually stated, "the worst of the worst is behind us." (He later of course whined that his words were taken out of context.)
Gomer Pyle frequently exasperated his immediate supervisor Sergeant Carter with the Private's Pollyanna-style demeanor. With positive economic surprises everywhere, it is no surprise that Roubini feels a bit frustrated as well. [more]
July 08, 2009 –
On June 1 we pointed to three clear markers that signified the beginning of US economic recovery. As we enter July more and more economists are also reflecting on the signs that the US economy as a whole is returning to growth.
On Tuesday, Rebecca Wilder in her excellent blog "News N Economics," reflected, "The labor market is almost surely the key to this recovery." She goes on to illustrate the "lagging peak" in initial jobless claims and it's correlation to the end of the recession. Robert Gordon published that back in April and we also pointed to his article in early May. Gordon's striking association between a GDP contraction trough and the final peak in unemployment claims for a recessionary cycle seems increasingly likely at this point in history as well.
Wilder highlights more encouraging signs: "once claims do peak, they tend to fall rather quickly. Therefore, history suggests that [jobless] claims should start to drop off sharply in the second half of 2009 (coming months)."
On Wednesday, James D. Hamilton (Professor of Economics at the University of California, San Diego) examines an excellent paper by James C. Morley, Associate Professor, at the University of Washington. Summarizing the Morley paper, Hamilton notes in his Econbrowser blog that "often a sharp economic downturn is followed by an equally sharp economic recovery." Hamilton continues, "So why would anyone predict anything other than a robust rebound? Will we see a robust recovery? I can't rule it out."
And on Wednesday we heard what was likely the most positive news from Scott Grannisreporting on corporate layoffs. Scott observes that "layoffs have all but vanished." Layoff levels are essentially back to those observed during the growth years of 2004-2007.
Meanwhile the beginnings of recovery in real estate continued this week. "Lower mortgage rates are helping to support the housing market," said Freddie Mac Chief Economist Frank Nothaft. "The 30-year fixed-rate mortgage rate peaked this year over the week of June 11 and is now around a quarter-of-a-percentage point lower this week." The Mortgage Bankers Association reported an increase in mortgage applications even though refinancing activity is at its lowest level since last fall. That means that significantly more applications are now being originated for home sales.
That trend was further corroborated by the National Association of Realtors who reported a modest rise in pending sales of existing homes last month. Pending home sales now show a sustained uptrend, rising for four consecutive months through May.
And as we noted last week, commercial real estate sales are also showing renewed signs of life. [more]
July 05, 2009 –
Last Wednesday the Institute for Supply Managment published its manufacturing report for June 2009. It's overall index (PMI) bumped up for the sixth straight month and stood at 44.8%. The reading suggests, "the overall economy grew for the second consecutive month" in June.
The reading also shows the overall manufacturing sector still on track for a return to growth in the fourth quarter of this year.
Norbert J. Ore, chair of ISM's Survey Committee was quoted as saying "Manufacturing continues to contract at a slower rate, but the trends in the indexes are encouraging as seven of 18 industries reported growth in June. Most encouraging is the gain in the Production Index, which is up 12.1 percentage points in the last two months to 52.5 percent. Aggressive inventory reduction continues and indications are that the de-stocking cycle is at or near the end in most industries."
The overall manufacturing trend continues to collorate well with the several manufacturing graphs we've published and tracked earlier in the year.
With the June ISM index we have yet another concrete indictor that recovery has begun for this cycle. [more]
July 02, 2009 –
On Monday, Blackstone Group (BX) said it had finished raising 3.1 billion euros, or $4.3 billion, for its Blackstone Real Estate Partners Europe III fund. (“BREP Europe III”) [more]
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