Leading Indicators: 1st decline in over a year

Oops! Even without Greece, today's reports stink.
It looks like $1,000,000,000,000.00+ doesn't buy much these days.

Jobless Claims
8:30 AM ET
Highlights
In a setback for the May payroll outlook, initial jobless claims jumped 25,000 in the May 15 week to 471,000. The disappointment includes a 2,000 upward revision to the prior week. There are no special factors to explain the latest week's jump. The 471,000 level is the highest in five weeks, the second highest since February, and 12,000 higher vs. mid-April. But in an important offset, the four-week average of 453,500 does show improvement from mid-April's 461,000.

Continuing claims also show improvement, down 40,000 in the May 8 week to 4.625 million. The four-week average of 4.643 million is little changed compared to April. The unemployment rate for insured workers is unchanged at 3.6 percent.

Initial claims have been stubbornly high with expectations hoping for a big move lower -- not a big move higher. If next week's report doesn't show a reversal, estimates for May payrolls will be very conservative. Stocks and commodities are moving lower in reaction to the data with money moving into the safety of Treasuries.

Leading Indicators
10:00 AM ET
Highlights
The Conference Board's index of leading economic indicators posted its first decline in a more than a year, down 0.1 percent in April and reflecting a decline in building permits and shortening delivery times. Unemployment claims also weighed on the index and may very well weigh on May's results given this morning's big jump. Consumer confidence was also a negative and, given the turmoil in Europe and losses in the U.S. stock market, may also be a negative for May. But the Conference Board is upbeat saying the recovery will continue though it may slow through the summer. Other data include a 0.3 percent rise for the coincident indicator in what is a key indication that the economy has indeed moved out of recession.

Philadelphia Fed Survey
10:00 AM ET
Highlights
Manufacturing activity shows steady strong growth this month according to the Philadelphia Fed's general business conditions index which came in at 21.4, a reading well above zero to indicate significant month-to-month growth and a reading very near April's 20.2 to indicate a similar pace of growth.

But the headline index is not a composite of components, only a tally of responses on a subjective single question regarding business activity. A look at sub-indexes shows less convincing strength. New orders are up in May at a reading of 6.1 but the pace of growth is significantly slower than the 13.9 reading in April. Manufacturers in the region added fewer employees in the month though shipments increased substantially, at 15.8 vs. April's 5.6. Delivery times slowed, which is a sign of congestion in the supply chain, while inventories fell perhaps reflecting a draw related to the increased pace of shipments. Input prices extended their sharp run of month-to-month acceleration with prices of finished goods continuing to show no pass through.

Putting the headline reading aside, this report is pretty much in line with the Empire State report issued earlier this week that shows moderation in this month's manufacturing activity. But the manufacturing sector can only accelerate so fast and it remains the economy's top force.

LEI ..one of the main component is stock market...so it goes w/out saying..

Recent econ news reminds of Terry Laundry's bigger picture possibility - i.e. a deflation recession. We're seeing rising joblessness, falling home prices and falling prices of everything. Granted its just the tip of what may be a much bigger problem, but that's what the numbers are showing so far. No jobs, no money, doesn't matter what things cost, can't buy them, so prices fall more, etc. And, of course, stock prices. Its been since the very early 80s since we've seen low PE ratios... know what I mean? mm

hey, weve had a lot of negative PEs, how low can you go;)

For the past 25 years or so we've become used to the idea that a PE of 15 or so for the DOW/SPX, etc. was "reasonable" but if you remember the 70s and early 80s the average PE for "value" was in the low single digits, with high dividends. (not counting the occassional growth stock story). We'll probably see that again, for the first time in a few decades, before this decline runs its course over the next couple of years. mm

For the past 25 years or so we've become used to the idea that a PE of 15 or so for the DOW/SPX, etc. was "reasonable" but if you remember the 70s and early 80s the average PE for "value" was in the low single digits, with high dividends. (not counting the occassional growth stock story). We'll probably see that again, for the first time in a few decades, before this decline runs its course over the next couple of years.

mm

I suspect this will be a generational "adjustment" which will see money put into mattresses and tin cans before stocks.
Higher dividends will have to be offered to get the widows back in.

Edited by Rogerdodger, 20 May 2010 - 02:37 PM.