Data was a bit mixed this morning, but we appear to be turning the corner in the equity markets to a “buy the dips” mood. Little has actually changed in the last month, but prices remain volatile as the bi-polarity of the market continues. The only people more clueless than the analyst’s are the investors themselves (you can include me in this group as the 5% rally from the recent lows has taken me entirely by surprise).
Retail sales were mixed this morning. The ICSC reported a 1.6% decline year over year and a 0.7% decline on a weekly basis. The losses are being attributed to the snow storms across the country. Redbook, on the other hand, reported a 1.8% gain. The consumer appears to be showing a pulse here.
Housing starts were better than analyst’s expectations (writing that just never gets old and certainly never will) as builders continue to see a leveling in demand. As we’ve previously noted, housing data needs to be thrown out the window until the housing stimulus is finished. I fear what we’re seeing now is nothing more than a stimulus based boost that is papering over the real weakness in the housing market. The market loved the news as it should. Like a heroine addict, the market just needs to stay high for the next 24 hours and this is today’s fix. Whether it can last….Now that is another question. Call me skeptical.
Industrial production and capacity utilization also outpaced analyst’s expectations. Production posted a 0.9% year over year gain. Econoday has the details:
“Industrial production posted another strong gain for January-but this time the strength was real and not weather related. Industrial production in January advanced 0.9 percent, following a 0.7 percent jump in December. The January was marginally better than the market projection for a 0.8 percent gain.
The manufacturing component made a robust comeback, jumping 1.0 percent after edging down 0.1 percent the month before. For the latest month, utilities output increased 0.7 percent after spiking 6.3 percent in December on atypically cold weather. Mining output rose 0.7 percent after dipping 0.2 percent in December.
A big chunk of the manufacturing spike was due to a jump in auto assemblies-but gains were healthy elsewhere. Motor vehicles & parts jumped a monthly 4.9 percent after a 0.3 percent decline in December. Excluding motor vehicles, manufacturing rebounded 0.8 percent in January, following a 0.1 percent decrease the month before.”
Thus far, it’s safe to say that the recovery in manufacturing is in process – though tepid.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.