“This week we will review the market conditions and what stock market bulls should be somewhat cautious of at this juncture”  – Lance Roberts

More Good News – Economy Weaker

This past week was filled with more good news for “drug addicted” stock market bulls as a slate of economic data came in much weaker than expected. As I discussed last week, the “bad news is good news” mantra continues to push asset prices as weaker economic data raises hopes that the Federal Reserve won’t pull the “punch bowl” away too soon.

This past week saw the Empire State Manufacturing index drop by 8 points to near contraction levels as the Philadelphia Fed Manufacturing Index plummeted by 15 points to a contraction level of -6.3. The housing market was battered as the NAHB homebuilders index collapsed by 10 points. Mortgage applications drop by 4% last week as is down 17% over the last year. Housing starts slid to just 880k (annual rate) from 1.04 million last month, and existing home sales missed expectations at 4.62 million down from 4.87 million last month.

While the Leading Economic Indicators rose by 0.3% in the latest month the internals were very weak.  More importantly, the coincident to lagging ratio, which is like a book-to-bill for the economy, fell further into recessionary territory.

Of course, all of the weakness is being blamed on the weather.  However, there are two points to be made here.  In many cases the data was weakening well before the cold weather set. Secondly, the data is already “seasonally adjusted” to account for the normal tendency to have inclement weather during the winter months. It is interesting that nobody questioned the “better than expected” data over the last two years as the “seasonal adjustments” boosted the reported data sharply as unseasonably warm winter prevailed?  

This week we will review the market conditions and what stock market bulls should be somewhat cautious of at this juncture.

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About Lance Roberts

Lance Roberts is the General Partner & CEO of STA Wealth Management, Host of the “Streettalk Live” Daily Radio Show (streamed live at www.streettalklive.com), and Chief Editor of the X-Report and the Daily X-Change Blog.
Follow me on Twitter: @streettalklive