I read dozens of publications every week in trying to keep on top of the economy, the markets, etc. One handy report I read each week comes from Wells Fargo Securities on Mondays. It takes a look at the main economic reports over the previous week and offers its forecasts for the reports due out in the current week.
Being bankers at heart, the editors tend to be a little more on the “glass is half full” side, but they do have some interesting analysis. Best of all, the reports are free. You can find them on Mondays at www.RealClearMarkets.com. I have included some excerpts from today’s report below.
Wells Fargo Securities
Weekly Economic & Financial Commentary
Slow and Steady Growth Continues
Expectations are now so low for the U.S. economy’s performance that the creation of 100,000 plus jobs in September, which includes a one-off increase of 45,000 returning Verizon workers, is hailed as a solid employment report. True, there were some pleasant positive surprises in the release. For example, there was the net upward revision of job creation over the prior two months of 99,000 jobs. The unemployment rate held steady at 9.1 percent as household employment and the U.S. labor force both grew briskly. This is usually a sign of an improving labor market. Average hourly earnings and working hours both increased. There was net positive job growth in several important categories, including construction, retailing, information services, business services and education and healthcare. The bottom line, however, is that monthly job growth of this magnitude will not reinvigorate the economic recovery and still leaves the economy vulnerable to future financial shocks.
The other economic data released this week revealed steady activity continued in September, and there were even a few positive surprises to report for a change, helping to break the brooding mood that has taken a hold of the markets in recent weeks. The ISM manufacturing index improved to 51.6 in September from 50.6 in August, beating consensus expectations for a modest deterioration in this measure. A hopeful sign was the improvement in the employment sub-index that increased to 53.8 in September. Shipments and prices paid also improved, showing some strengthening in current manufacturing activity from August’s anemic performance. This is consistent with the bounce that we saw in the Philly Fed and Chicago-PMI manufacturing surveys in September.
A particularly encouraging development this week was the solid domestic auto sales figures for September. Domestic auto sales improved to 4.2 million units from 4.1 million at a seasonally adjusted annual rate, despite declining consumer confidence and financial market volatility. Domestic light truck sales jumped to 5.9 million from 5.4 million. Strong farm incomes and pent-up demand for trucks were likely a big driver on the month. The solid auto and truck sales data will keep auto production humming along in the fourth quarter despite caution weighing on other manufacturers.
Construction was another bright spot this week. Construction spending jumped 1.4 percent. The jump reflected activity in August and was much bigger than expected, leading many analysts to push up their estimates for third quarter GDP growth. Construction spending is up 4.8 percent over the past five months.
The reading from the service sector was not quite as reassuring. The ISM non-manufacturing index softened to 53.0 in September from 53.3 in August. The factory orders report was also a bit of a downer. August factory orders slipped 0.2 percent on weakness in durable and nondurable orders. The decline in petroleum prices on the month helped push nondurable goods orders lower. END QUOTE
US Markets Higher on Europe News
Stocks soared higher today, largely because the French and German leaders announced that a new “comprehensive response” to strengthen European banks should be completed by the end of this month. When have we heard that before? Here’s a story on point:
http://finance.yahoo.com/news/Stocks-jump-on-European-apf-1432038199.html?x=0
Elsewhere, I read that the major credit rating agencies – Fitch and Moody’s in particular – are downgrading banks across much of Europe. I continue to believe that there will be more bad news coming out of Europe, so enjoy strong days like today in the equity markets. I do not believe the bear market is over.
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