Avete Caesar Powell !

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“We’ve seen some data that in my case will add some confidence to my view that inflation is moving up to target,” said, the newley appointed Federal Reserve Chairman Jerome Powell. Today, Chair Powell addressed Congress with his guidence on economic growth and what to expect from monetary policies during his reign over the Fed.
The U.S. benmark 10 year treasury rallied +5bps to 2.915% during Chair Powells’ testimony. Leading equities to sell off for the first time since Wednesday of last week.
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Chair powell signled to markets that more than three rate hikes this year is likely, in order to cool a persumed overheated economy. However, the distinction between a overheating economy and a stock market, where multiples have be overvalued for months, discussed durning today’s proceedings.
Just prior to Chair Powell’s testimoney a myriad of economic data was released, including Durable Goods Orders. Where a weaker than expected print in orders was traced to the unprecidatable tarnsporation sector.
  • United States Durable Goods Orders MoM was reported at -3.7% in Jan from 2.9% in the previous period. It was expected at -2%. 
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After two months of strong gains , nondefense aircraft orders fell 28% in January. Meanwhile, motor vehicles and parts posted a scant increase of 0.1%, whucg was just enough to offset December’s decline. Orders for new Vehicles are still rising at an impressive 11.9% pace on a three-month average annualized babsis, althiygh this is a bit softer from the comporable pace set in December. 

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Orders for defense aircraft also fell sharply (down 46%). This led to a 26.3% decline in toal defense orders, but excluding this category, private orders still looked weak, having declined 2.7%. Most disappointiong in today’s report was the 0.2% drop in orders when excluding aircraft and defense orders, or “core” orders. That followed a 0.6% decline in Decemebr and the trend in core capital goods orders has weakened noticably from an impressive run in the fall of 2017; core capital goods orders are up at a 3.7% three-month average annualized pace, compared to over 18% as recently as Novemeber.

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With survey data still confirming soaring confidence in the business sector and the boost to after-tax corporate earnings just beginning to benefit from the tax cuts, there are plenty of silver linings for business spending. That said, the softening in core orders is beinning to look more at odds with soft survey data like the ISM manufacturing index, and cosecutive declines in core capital goods orders cannot be ignored.

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Expect in the near term, the hard data for oders to converge with soft survey data. In times of such pronounced survey strength, however, the gap between hard and soft data is usually narrowerd by business surveys getting reined in, rather than the hard orders data which feed into GDP experiencing a marked acceleration.
Hence, expect to see some softening in the ISM index when the February report is released on Thrusday. Prior to this morning’s release, there was an implied  lag in the effects of the tax cuts and thus, a slower pace of equioment soending in the first quarter. Remarkably, against this backdrop of euphoria and favorable fiscal policy, the hard data suggest downside risk to our alredy-termpered forecast for capital goods spending in the first quarter.
Mr. Tim Quinlan and Ms. Sarah House

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New Orders

New orders for manufactured durable goods in January decreased $9.2 billion or 3.7% to $239.7 billion. This decrease, down following two concecutive monthly increases, followed a 2.6% December increase. Excluding transportation, new orders decreased 0.3%. Excluding defense, new orders decreased 2.7%. Transporation equpment, also down following two consecutive monthly increases, led the decrease, $8.6 billion or 10.0% to $77.7 billion.

Shippments

Shipments of manufactured durable goods in January, up eight of the last nine months, increased $0.6 billion or 0.2% to $247.0 billion. This followed a 0.5 % December increase. Transportation equipment, up two of the last three months, led the increase, $0.4 billion or 0.5% to $81.3 billion.

Unfilled Orders

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Inventories 

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1

Capital Goods

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2

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  • United States Wholesale Inventories MoM Adv was reported at 0.7% in Jan from 0.4% in the previous period. It was expected at 0.3%. 

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  • United States Redbook MoM was reported at -0.6% in 24/Feb from -0.7% in the previous period.

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  • United States S&P/Case-Shiller Home Price MoM was reported at 0.2% in Dec It was expected at 0.1%. 

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3

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4

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5

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6

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9

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Orders for defense aircraft also fell sharply (down 46%). This led to a 26.3% decline in toal defense orders, but excluding this category, private orders still looked weak, having declined 2.7%. Most disappointiong in today’s report was the 0.2% drop in orders when excluding aircraft and defense orders, or “core” orders. That followed a 0.6% decline in Decemebr and the trend in core capital goods orders has weakened noticably from an impressive run in the fall of 2017; core capital goods orders are up at a 3.7% three-month average annualized pace, compared to over 18% as recently as Novemeber.
0

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Orders for defense aircraft also fell sharply (down 46%). This led to a 26.3% decline in toal defense orders, but excluding this category, private orders still looked weak, having declined 2.7%. Most disappointiong in today’s report was the 0.2% drop in orders when excluding aircraft and defense orders, or “core” orders. That followed a 0.6% decline in Decemebr and the trend in core capital goods orders has weakened noticably from an impressive run in the fall of 2017; core capital goods orders are up at a 3.7% three-month average annualized pace, compared to over 18% as recently as Novemeber.
1

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  • United States House Price Index MoM was reported at 0.3% in Dec from 0.4% in the previous period. It was expected at 0.4%. 
  • Consumer Confidence surged to new highs in February, rising 6.5 points to 130.8  durning the month. The strong job market has pushed consumers’ assement of the present situation even higher. Expectations also rose.
Orders for defense aircraft also fell sharply (down 46%). This led to a 26.3% decline in toal defense orders, but excluding this category, private orders still looked weak, having declined 2.7%. Most disappointiong in today’s report was the 0.2% drop in orders when excluding aircraft and defense orders, or “core” orders. That followed a 0.6% decline in Decemebr and the trend in core capital goods orders has weakened noticably from an impressive run in the fall of 2017; core capital goods orders are up at a 3.7% three-month average annualized pace, compared to over 18% as recently as Novemeber.
2
Orders for defense aircraft also fell sharply (down 46%). This led to a 26.3% decline in toal defense orders, but excluding this category, private orders still looked weak, having declined 2.7%. Most disappointiong in today’s report was the 0.2% drop in orders when excluding aircraft and defense orders, or “core” orders. That followed a 0.6% decline in Decemebr and the trend in core capital goods orders has weakened noticably from an impressive run in the fall of 2017; core capital goods orders are up at a 3.7% three-month average annualized pace, compared to over 18% as recently as Novemeber.
3
  • United States 4-Week Bill Auction was reported at 1.495% from 1.38% in the previous period.
  • United States 52-Week Bill Auction was reported at 2.020% from 1.83% in the previous period

Market Breadth Indicators

$NAA200R

$NAAD

$NAHL

$NASI

$NAUD

$NYA200R

$NYAD

$NYHL

$NYMO

$NYSI

$NYUD

$TICk

$TICKQ

$TRIN

$TRINQ

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$USD.png

XEU

XJY

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WTIC

WTIC_GOLD

WTIC_OEX

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NDX_vol

RUT_Vol

SPX_Vol

Gold_vol

DJIA_vol

Put?Call

Put?Call 10ma

Source:

U.S. Census Bureau

Yardeni Research

-R.W.N II

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