Last week, the Conference Board released their latest leading and coincident indicators. They were up .3% M/M while the 6-month rolling average was +2.3%. But while 9 of 10 indicators increased, there’s been an industrial weakness for the last 7 months:
The average workweek of production workers, new consumer goods orders, and manufacturers’ new orders of non-defense goods have all been weak for the last 7 months. This is not fatal, as other LEIs have taken up the slack. But it does point to a weakness in the industrial sector that’s occurred for most of this expansion.
The Conference Board report also contained the latest CEI reading, which was up .1% M/M and 1.1% on a rolling 6-month basis. With the exception of industrial production, all CEIs are in clear uptrends:
The housing market remains in moderate growth mode: new homes sales (about 105 of the market) increased 2.9% M/M and 8.9% Y/Y, while existing home sales were up 1.1% M/M and 8.9% Y/Y. As this chart shows, both markets are stable:
Economic Conclusion: as much as I’ve grown tired of using the adjective “moderate” to describe the economic data or the general tenor of the expansion, that’s the tone of this week’s data. The LEIs and CEIs point to modest growth, as does the news from the housing market. This is corroborated by the Fed’s GDP prediction: the NY Fed places the latest projected growth rate at 1.8% while the Atlanta Fed is at 2.9%.
Market Analysis: this was a mild week for the markets:
While the QQQs rallied strongly, this was mostly a reaction to the previous week’s sell-off; the other averages price action was far tamer. The real issue in the market is the rally in the long-end of the treasury market:
The iShares 20+ Year Treasury Bonds (NASDAQ:TLT), which rallied slightly over 1% last week, are now in a clear uptrend. There is also plenty of room to rally; the MACD can still advance and prices have at least 10 more points to move. The S&P 500 futures (NYSE:SPY) are in a different spot:
The market is still in an uptrend. But last week, prices consolidated the recent move above the upper 230s.
There are only so many ways to say, "the economic is expanding moderately and the market, while expensive, has no fundamental reason to sell-off in a continuous way." So I wont' try. That's where we are.