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  • DATA DUMP, MARKET SLUMP - By WSS Research Desk 0 comments
    Aug 15, 2013 3:19 PM

    By David Urani

    For so many market-watchers, stocks seemed due for a pullback and so here we are getting some of that today. After a few days without a whole lot to speak of economic-wise, we got a bit of a data dump today, some good and some bad. That said, we wouldn't necessarily say the data was bad enough to warrant today's selloff, which largely seems to be a culmination of angst. Let's take a run-down:

    Jobless Claims

    This is one of my favorite economic data points as it comes out frequently (weekly), and it tends to be a pretty accurate indicator with respect to employment and correlates with other things as well. Well, the reading for last week comes in today at 320k, a nice drop from 335k previously and the lowest reading to date in the recovery. In fact, it was the best since October 2007. I actually prefer to look at the 4-week average to strip out volatility and that was at a new low for the cycle as well, at 332k.

    All in all this is a great number, and likewise, it has been trending very well over the past month.

    Production Pause

    Industrial production as measured by the Fed for July came in soft. The headline result was 0.0% month to month whereas the Street was looking for a 0.3% gain, and that follows a 0.2% increase in June. That included a manufacturing component that was down 0.1%. Autos were somewhat of a drag, down 1.7% for the month, but metals were the strong point, rising 2.6%. Petroleum and coal were also up 2.0%, while apparel was up 0.7%.

    Along with that we also got the regional manufacturing indices from New York and Philadelphia. The Empire State index was down to 8.24 from 9.46 (below the 10.0 consensus) and the Philly index was down to 9.3 from 19.8 (below the 15.0 consensus).

    Consumer Prices in Check

    Yesterday, we got a flat Producer Price Index, and today we got the July Consumer Price Index, which was up 0.2% for the month. That comes in line with the consensus estimate. 'Core' prices (excluding food and energy) also rose by 0.2%, in line with consensus as well.

    It was a good change of pace from the 0.5% increase in June, which was driven by a 6.3% jump in gas. This time around, gas was up 1.0%. Aside from energy, tobacco was up 1.4% and apparel was up 0.6%, partially offset by a 1.3% decline in airfare and a 0.4% decline for autos.

    So inflation remains in check, if not low. And that is particularly interesting coming alongside St. Louis Fed member Bullard who said yesterday that he was a little worried that inflation is running too low. Of course, inflation is one of the key factors the Fed watches when considering monetary policy and the tame inflation would be one impetus to actually continue with QE.

    Builders Bullish, Market Bearish

    One piece of data we got today that was actually good was the NAHB's Housing Market Index, the monthly measure of homebuilder confidence. The August reading came in at 59, which was up from 56 in July and above the 56 consensus. The index hasn't been this high since 2005. The six-month outlook remains the strongest aspect, while the measure of present conditions rose three points to its highest level since January 2006.

    And this is all quite interesting, because it seems home builders are as optimistic as they've been since the bubble days. Yet, those builders' own stock prices are behaving quite differently. Below, we can see how the Housing Market Index has diverged from housing stocks (as measured by the Dow Jones US Home Construction Index).

    We've been pointing out a lot in the past couple of months that the market has a large sense of panic over rising interest rates, particularly with respect to mortgages. That fear is taking homebuilder equities by storm, and it seems any news, no matter how good, has not been enough to stem the tide. Well, at least for today, the market was lisptening as the Dow Jones US Home Construction Index, which had been down as much as 3% after the opening bell, made a reversal on the data and is now trading up 1.7% on the day.


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