Recession, Really? Not Based On Today’s Economic Data

Sorry for typos and such today, I have had to re-write parts of this a bunch of times due to market movements.

US Markets

  • S&P 500 Futures -5 points
  • US 10-Year  1.54%
  • Oil $54.55
  • Dollar Index 97.86
  • VIX 22.25

International Markets

  • Shanghai +0.25%
  • HSI +0.76%
  • KOSPI – Closed
  • Nikkei -1.2%
  • DAX -0.71%
  • FTSE -1.21%

Economic Data

I will tell you after looking through this morning Economic data one would never know we were heading to a “recession”, notice the quotes.  Just listen to these numbers. 

  • Retail sales +0.7% vs. estimates of 0.3%
  • Philly Fed +16.8 vs. est. +11.1
  • Empire State +4.8 vs. est. +2.5
  • Non-farm productivity +2.3% vs. est. +1.5%
  • Unit labor cost +2.4% vs. est +2%

It doesn’t sound recessionary to me. Wow.  Maybe something else is weighing on yields. Oh yeah, that is right, the rest of the world, and a the search for yield.

The GDPNow Forecast is due today, I expect a reading north of 2%

The Spread

This morning the all-important US-Germany Spread on the 10-Years are finally cracking the all-important 2.25% level. Again, I continue to believe this is the leg lower that puts a bottom into place for yields at least over the short-term. That would send the spread back to 2% and back to its pre-2016 levels. This spread is one of the most important things to watch because this spread helps to create some of the arbitrage opportunities that are responsible for dragging our yields lower.

Meanwhile, the 30-year minus the three months spread is around six basis points.

spreads

S&P 500 (SPY)

The S&P 500 futures are all over the place today, and it is making it extremely hard to determine the potential direction for stock’s today. It likely means that the economic data due to is likely to have the most significant impact. Sorry, even the charts from yesterday weren’t giving me a good feeling. 2825 is the lows this morning, and that is likely the next level of support.

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Disclosure: Michael Kramer and the clients of Mott Capital own Cisco

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when the ...

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Comments

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Carol W 7 months ago Contributor's comment

Great points as usual Michael - blame the hedge funds wreaking havoc in the bonds. When will they ever learn?

Jimmy Richards 6 months ago Member's comment

Bump.