By Carlos Guillen
After all was said and done last week was certainly not a good week for stocks, as reflected by the Dow Jones Industrial Average, which posted losses for all five sessions totaling over 387 points, as investors reacted over the escalation of conflict between Ukraine and Russia as well as to the slowdown in China. This week, stocks are off to a great start, with the Dow now up over 130 points during the first half of the trading session, as better-than-forecasted data on industrial production boosted optimism on the U.S. economy, and as investors looked beyond Crimea.
Perhaps the main positive economic data out today was that industrial production; which measures the output of U.S. manufacturers, utilities, and mines; rose in February by the most in six months, signaling U.S. manufacturing is improving in the first quarter of the year, in spite of severe snow storms and frigid temperatures. According to the U.S. Federal Reserve, industrial production during February increased month-over-month by 0.6 percent, better than the Street's consensus estimate calling for a 0.1 percent month-over-month rise, reaching its highest level ever. In the same time range, capacity utilization increased from 78.5 percent to 78.8 percent, landing higher than the Street's consensus estimate of 78.5 percent. While in January there was a pull back in industrial production, the decline was less severe than previously stated; in fact, industrial production for January was revised from a decline of 0.3 percent to a decline of 0.2 percent. As such, it is becoming apparent that demand is still alive and kicking, and it may continue to ramp higher with the weather component getting out of the way.
On another positive note, manufacturing in the New York region took a rather encouraging reversal this month. According to the Federal Reserve Bank of New York, its general business conditions index March result landed at 5.6, higher than the Street's consensus estimate of 5.4, and increasing from the 4.5 reached in February. Given that readings greater than zero signal expansion, this month's result makes the fourteenth month of expansion in the region that covers New York, northern New Jersey, and southern Connecticut. Certainly encouraging was that the index for the six-month outlook continued to convey a solid degree of optimism about future business conditions, though to a somewhat lesser degree than last month. The index for expected general business conditions fell six points to 33.2. A bit less encouraging was that the index for expected number of employees fell from 25.0 to 17.7; however, it remained firmly in positive territory. More encouraging was that the index for expected capital expenditures rose 14 points to 16.5, after dropping sharply in the prior month.
Over in Crimea, the percentage of voters in favor of joining Russia reached a whopping 95.5 percent, while a majority was expected, this level of approval was certainly not expected. Now the response for the U.S. and Europe will be in the form of economic sanctions. However, no one expects this to be of any significance. After the voting, Crimea's parliament officially applied to become part of Russia. This Friday, the Russian parliament will vote on accepting Crimea into the Russian Federation.
In all, investors are looking past Crimea, and refocusing on the economy here at home. And this week promises to be filled with economic goodies including Housing Permits, CPI, an FOMC rate decision, leading indicators, and lots more so sit tight, it is going to be an interesting week.
By David Urani
We got another piece of housing data today in the NAHB/Wells Fargo Housing Market Index, a reading of homebuilder confidence. The index came in at a reading of 47 for March, up from 46 in February but below the 50 consensus estimate. In February the index had sank all the way to the lowest point since last May, but was also coming from what was a very good reading of 56 in January. Confidence had been Very high from July through January, with optimism not seen since 2006.
Certainly this month and last confidence has retraced, and I would have liked to see a better reading. The spring selling season should be just starting to get into gear and so far there is not clear evidence as to how things will shape up. This reading does suggest builders are keeping their expectations in check, although it's not necessarily a 'bad' reading either as it's higher than last year's reading of 44.