THOUGHTS ON THIS MORNING’S DATA
Despite solid earnings from Intel and a mixed bag out of JP Morgan, consumer data is weighing on the market this morning.
The Empire State Mfg Survey showed a continuation in the positive trends as the index rose to 15.92. This should bode well for the Philly Fed data and future ISM readings. Industrial Production and capacity utilization data was in-line with estimates at 0.6% and 72%.
Consumer data is where the real concerns are. Today’s University of Michigan shows the continued low readings in consumer sentiment. As we mentioned in “the recession on Main Street continues” the consumer is still very weak and feeling little to no effect from the so-called recovery. In addition, earnings from JP Morgan gave us another glance into the balance sheet of consumers. The bank said it set aside $4.2B in mortgage losses, up $652MM from the year ago period. Loan loss reserves in the private banking sector rose to $494MM from $190MM. Jamie Dimon was unwilling to say whether we turned the corner or not in terms of a consumer recovery.
The macro consumer trends remain very alarming. Clearly, the de-leveraging at the consumer level continues and this likely bodes poorly for the strength of the recovery.
TPC,
I continue to think with consumers de-leveraging, the market may not see those money on the sidelines from retail investors come in. They have to pay down debt and all the other expenses. Where will they get the money to put in the market? What about those about to retire? They need cash to live on. And they may even sell their homes if there’s any equity left.
Your theory could also apply to insiders, who are selling like crazy into this rally. After all, insiders are simply higher earning consumers, who were as likely to leverage their lifestyle up to unmanageable means. Why buy the $10M home when we can reach on the $14M, only to see it drop below $9M today. If that’s the case, sell baby sell.