Commentaries

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Looking for expansion in manufacturing

The Institute for Supply Management will release its latest survey on manufacturing at 10am, and all eyes will be on the headline index which should finally break through 50 – the break even mark between expansion contraction.

Moody’s economist John Lonski is looking for 50.7, which would be the best showing since January 2008 and further sign that the bad old days of the post-Lehman tailspin are behind the us.

You can find the release here at 10am.

To buy, or not to buy MBS

It looks like the lines are being drawn within the Fed regarding its massive $1.25 trillion MBS asset purchase plan that’s due to expire at the end of the year.

New York Fed President William Dudley told CNBC earlier Monday that it’s too early to think about pulling back on these programs, and points to market expectations as a big reason the Fed should proceed carefully. The market expects the Fed to buy the full amount and is currently trying to figure out whether there’s a possibility the Fed will extend the program into next year to make for a smoother transition.

Japan takes a kinder approach to growth

The victorious Democratic Party of Japan did not put economic growth at the heart of its electoral sales pitch. The party’s manifesto mentions “growth” only once. The word “support”, by contrast, appears 19 times.

Even so, there are reasons for optimism that the DPJ’s softer and more nurturing policies are just what the economy needs.
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The mirage of U.S. healthcare

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On healthcare, the White House is struggling with a political riptide that threatens to drag it into deep water.

Americans, as they contemplate change, have suffered a weakness of nerve. The main reason is that nearly two thirds of Americans are apparently happy with their healthcare coverage, for all its deficiencies. Repeated reassurances from President Obama that those who like the existing set-up will not be forced to change, have had little effect.

It’s a long way from 950 for the S&P 500

It’s hard to believe that little over a month ago, investors were holding their breath to see if the S&P 500 had enough momentum to burst through 950 – a psychological level that had held firm since November of last year. Carry through buying Monday from last week’s renewed cheer that the U.S. and global economies were leaving recession behind has pushed the S&P 500 to 1033, its highest level since Oct. 6, 2008 when it traded at 1056.89.

But as I noted here last week, markets continue to be pretty fickle when it comes to betting on recovery vs. continuing slump.

GM coming to government’s rescue

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Bankruptcy has certainly been kind to GM. It’s now able to dig into its own cash reserves and help the government out.

Auto dealers, fed up with government’s tardiness in sending out the rebates, started abandoning the program since they’re hardly in a position to float the up to $4,500 a pop given to those exchanging their clunker for a new, more fuel-efficient car.

U.S. shopper: from muscleman to weakling

Americans shoppers have not only been the driving force behind the U.S. economy. They are also a kind of international public good.

The $10 trillion of U.S. consumption is not just 70 percent of the U.S. economy. It is around 16 percent of the global economy.

Turning point in jobs?

Sure they’re still cutting jobs, by nonfarm payrolls are shrinking at slower pace, down only 247K in July, and the unemployment rate actually fell to 9.4% from 9.5%. With other data showing a tentative turning point in housing and manufacturing moving toward expansion, this is starting to feel like the real deal.

Sure July is only one month, but the Treasury market isn’t waiting. The 10-year benchmark is down nearly a point to yield 3.88%, bringing the big 4.0% threshold back into focus. Question now will be whether investors start fearing a rise in yields will quash the economic growth.

Can good numbers be bad news?

Barring any unexpected stumbles, and revisions aside, today will be the last time this year that Americans are told their economy is shrinking.

Indeed, the modest one percent decline in second-quarter gross domestic product could be followed by growth rates as high as three percent in the final six months of the year.

Tech results give few clues to economy: Eric Auchard

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Windows 7 touchscreen demonstrationBy Eric Auchard

LONDON, July 24 (Reuters) – Investors have proved all too ready to interpret positive earnings trends from Intel, IBM and Apple as signs of economic recovery and to justify a continued rally in technology stocks.

Now they are taking the wrong lessons in reverse by reading disappointing results from Microsoft Corp as evidence that a nascent rebound in the economy has stalled.

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