We may see another leg donw.
The Chicago manufacturing index fell to a low not seen since 2001 on Friday.
The Chicago-area “manufacturer purchasing activity” fell from 51, to 44, in February -- way lower than quants and wonks alike thought it would. Dropping below the 50-point line signals increased uncertainty and forecasts “negative growth” -- an oxymoron only a two-armed economist could dream up.
Likewise, the Institute for Supply Management reported a worse-than-expected February manufacturing report this morning. The ISM’s monthly manufacturing index fell from 50.7, to 48.3.
Still, according to the ISM, history shows that the U.S. is not in an official “recession” until the index nears 41… as manufacturing has never been a smaller part of the U.S. economy.
Contrary to a recent increase in consumer spending, consumer sentiment is waning.
U.S. consumer sentiment in February fell to a score of 70.8, reports Reuters and the University of Michigan. Consumers haven’t been this bummed out about their prospects since Dubya’s father was asking people to read his lips. Reuters and the University of Michigan cited the first monthly drop in employment in four years -- and rising gas prices -- as the two key contributors to a worse-than-expected February.
Coupled with the Conference Board’s sentiment survey from last week -- at five-year lows -- it’s almost safe to say that U.S. consumers are starting to fear an economic downturn. When (or if) they’ll start acting like it… your guess is as good as ours. The following may, at some point, be of concern, too…
The U.S. dollar struck a fresh record low again early this morning. The dollar index declined to 73.4… but it wasn’t against the euro this time. In fact, the eurozone currency fell a penny, to $1.51. Lo and behold, it was the yen’s turn to take a few shots at the punch-drunk dollar.
The Japanese currency strengthened over 2 full points in as many days, to 103. That’s more than a three-year high versus the dollar.
The dollar index is down 13% over the last 12 months.
“The thing that put the dollar on the greased skids last week,” our currency sage Chuck Butler reminds us, “still exists this week. And that, simply put, is the fact that the Fed is going to cut rates even further.”
And they plan to do more than just cut rates. The Fed will auction off some $60 billion more in short-term loans this month.
As a “service” to the U.S. economy, the Fed will print $30 billion fresh dollar bills for auction on March 10, and then again on March 24, and then lend them to banks at rates that no normal consumer or small business could ever attain.
Gold rallied to yet another record high this morning on word of a weaker greenback. The precious metal shot up to $984 per ounce in Hong Kong trading. Silver prices followed suit, rallying to even greater 27-year highs. It’ll now cost you a cool $20 to score an ounce of silver.
Meanwhile, oil backed off its recent $103 high as the U.S. market sold everything in sight. Some “soft” commodities, namely wheat, have retreated from record highs lately, as well.
3 comments:
TMA shows us how tight credit really is. However, this whole economy is built on credits. I don't know how things can possibly work without banks lending out money, at least for most of the mid and small caps. The only places to be long are energy and commodities. But will these last? That is hard to answer.
As my opinion , Tech is on the edge of bottom. Another 5~ 10% down will be a buy on tech.
Thanks. I agree, this is a great idea for longer term play. However, picking entry point could be tricky. I just don't think the mess in US has fully discounted over the globe yet. Until then, I don't see anything bottoming. Given a lot of tech are under value, there is no catalyst to boost them until the holiday season. I will wait until all the negatives are discounted and technicals turn around before getting in. Of course, it is overly negative out there now. And there is the changes that big money would rotate into tech but that will be more of a trade for now.
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