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THOUGHTS ON THIS MORNING’S DATA

Lot’s of data out this morning.  Let’s cut to the chase.  Consumer sentiment was a non-event and came in right at analyst estimates of 73.6.  GDP was revised slightly higher this morning from 5.7% to 5.9%, but a look under the hood shows the revision was not all positive.  Sales growth was revised down to 1.9% from 2.2% – the organic growth of this 5.9% figure is practically non-existent.  Econoday has the sales details:

“Within final sales, there was some strength in investment in equipment & software, posting an 18.2 percent jump, while residential investment advanced 5.0 percent. PCEs rose 1.7 percent in the latest period. Net exports shrank by $10.3 billion with exports spiking 22.4 percent and imports gaining 15.3 percent annualized. Nonresidential structures fell 13.9 percent.”

In addition, the price component decreased to 0.4% from 0.6%.  Companies still have very little pricing power in this environment.  All in all, the headline figure is very sexy, but a look under the hood shows something you might not want to  jump in bed with.

Existing home sales showed a steep decline at 5.05M.  Analysts expected 5.5M.This was the same story with Wednesday’s new home sales.  There’s just no two ways around it – the housing market is remarkably weak.  Stocks appear to be largely ignoring the weakness, however as they anticipate a big boost in the Spring buying season as the tax credit comes to an end.

Chicago PMI came in strong again.  The manufacturing arm of the economy truly is the strong-point in the economic recovery.  Econoday has the details:

“Sharper month-to-month slowing in deliveries leads a very strong Chicago purchasers’ report for February. Deliveries jumped to 62.6 from January’s 55.3, both readings over 50 to indicate month-to-month slowing with February’s plus-60 level to indicate a significant degree of month-to-month slowing. This is good news as the slowing indicates strains on shipping and warehousing, strains signaling strong economic activity.

A sudden rise in backlog orders, to 58.5 vs. 54.3, further indicates lack of spare capacity. New orders remain extremely strong, at 62.2 for a fifth straight plus-60 reading, while production continues to expand, at 65.2 for its third straight plus-60 reading. Inventories were drawn down in the month which, given the strength in production, likely reflect, not liquidation, but a drawing related to production needs. Prices paid remain elevated, at 67.7, but there’s no indication of price traction for finished goods.”

All in all it’s a mixed bag.  Stocks are all over the place following the news as retail and semiconductors trade lower while banks and commodities trader higher.

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