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US Economy: WSJ Says "All Clear" ... Nope

Takeaway: Brighter economic data? Seriously?

US Economy: WSJ Says "All Clear" ... Nope - economic indicators cartoon 02.24.2016 

 

Head-scratcher of the day via the Wall Street Journal:

 

"Brighter economic data raises specter of Fed rate increase; yield curve is flattest since 2007."

 

Huh?

 

Here's a better explanation as to why... ugly S&P 1Q16 earnings:

 

The bond market is signaling a precarious reality... a.k.a. #GrowthSlowing. Here's analysis from Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:

 

"Yield spread flattening = leading indicator of economic slowing – at 94bps wide this am (10yr minus 2yr) that’s a fresh YTD low and it’s driven by the 2yr popping to 0.84% on concern the Fed will hike on a rising CPI? If the Fed raises rates in June, they will make US Equity Beta Bears happy (reminder: rising inflation takes DOWN our Street low GDP forecast for Q2)."

 

Addressing all the supposedly "brighter" data, Hedgeye Senior Macro analyst Darius Dale provides this chart of the recently reported key economic releases. Dale writes:

 

"U.S. Economic Summary: green shoots where the trend remains bearish; red shoots where the trend has likely bottomed."

 

Click image to enlarge

 

US Economy: WSJ Says "All Clear" ... Nope - us economic summary

 

Dale continues:

 

"Not much to do with those [sequential green shoots] other than trust the forward-looking components of our process, such as Mr. Market himself."

 

... A.K.A. the 10s/2s spread. Here's the yield spread.

 

US Economy: WSJ Says "All Clear" ... Nope - 10y2y spread 5 18

Click to enlarge

 

What do you do with that?

 

Dale's conclusion:

 

"This is our third or fourth short-term headfake in domestic economic data since the cycle peaked in 1H15. Elongate your memory. FYI, the TSY 10s-2s spread compressing to new cycle lows is not exactly a bullish indicator... See through the S/T headfake in the data."

 

In other words.. stick with your #GrowthSlowing positions... Long Bonds (TLT) and Utilities (XLU).


Daily Market Data Dump: Wednesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Wednesday - equity markets 5 18

 

Daily Market Data Dump: Wednesday - sector performance 5 18

 

Daily Market Data Dump: Wednesday - volume 5 18

 

Daily Market Data Dump: Wednesday - rates and spreads 5 18


CHART OF THE DAY: Housing Starts & The May-laise

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye U.S. Macro analyst Christian Drake. Click here to learn more.

 

"... I’m going to give you a TTM slope and you tell me what macro series it belongs to:

  1. Slope = 0.00
  2. Slope = -0.00
  3. Slope = 0.02
  4. Last 4 Months Change: +0.0, +0.0, +0.0, +0.0

 

Answers:

  1. Housing Starts
  2. Pending Home Sales
  3. New Home Sales
  4. Builder Confidence" 

 

CHART OF THE DAY: Housing Starts & The May-laise - 5.18.16 Starts total zero Slope


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Cartoon of the Day: Oh Fudge

Cartoon of the Day: Oh Fudge - FED fudge cartoon 05.17.2016

 

The biggest risk in macro? Believing the Fed's serially overoptimistic forecast.


Ex-Energy Earnings Still Terrible

Takeaway: A total of 458/500 S&P 500 companies have reported aggregate sales and earnings growth down -2.4% and -8.7% respectively.

Ex-Energy Earnings Still Terrible - oil mlp

 

A total of 458/500 S&P 500 companies have reported aggregate sales and earnings growth down -2.4% and -8.7% respectively.

 

Here's the breakdown by sector:

 

  • So far, 6 of 10 sectors have reported negative sales and earnings growth;
  • Our favorite sector short, Financials (XLF), reported sales and earnings growth down -1.7% and -14.3%;
  • Energy (XLE) sales and earnings growth down -31.6% and -108.7% respectively;

 

Click image to enlarge

Ex-Energy Earnings Still Terrible - s p earnings 5 17


Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets 5 17

 

Daily Market Data Dump: Tuesday - sector performance 5 17

 

Daily Market Data Dump: Tuesday - volume 5 17

 

Daily Market Data Dump: Tuesday - rates and spreads 5 17


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