Economic Update 03/04/13

DESPITE ANXIETIES, DOW STAYS ABOVE 14,000

The DJIA settled at 14,089.66 Friday, gaining 0.64% on the week. The S&P 500 (+0.17% to 1,518.20) and NASDAQ (+0.25% to 3,169.74) also logged five-day advances. All this happened in the face of significant instability, as Wall Street fretted over the deadlock in Italy’s national elections and the sequester cuts taking effect on March 1. Congress and the White House could not arrange a deal to delay the sequestration last week, which means that $85 billion will be subtracted from the budgets of government agencies between March 2 and October 1 unless a bipartisan agreement emerges to undo the cuts.

TERRIFIC REAL ESTATE DATA HELPS BUOY STOCKS

New home buying accelerated 16% in January – the biggest monthly rise in almost 20 years, according to the Commerce Department. Pending home sales rose 4.5% in January, the National Association of Realtors said; that was far above the 1.0% gain forecast by economists polled by Briefing.com. Finally, the December edition of the S&P/Case-Shiller Home Price Index showed a 6.8% yearly gain across 20 metro markets, bettering November’s 5.5% impressive annualized increase.

MANUFACTURING PMI RISES IN FEBRUARY

The Institute for Supply Management’s manufacturing PMI improved 1.1% in February to 54.2. While the Commerce Department noted a 5.2% overall retreat in durable goods orders in January (the first decline in four months), new orders rose 1.9% when the volatile transportation category was factored out.

CONSUMER CONFIDENCE & SPENDING HOLD UP

The Conference Board’s February consumer confidence poll soared to 69.0 from January’s 58.4 mark, and the University of Michigan’s final February consumer sentiment survey came in at 77.6, topping the Reuters consensus forecast of 76.3. The federal government revised Q4 GDP north slightly to +0.1% last week; consumer spending rose 0.2% in January, even as consumer incomes fell 3.6%.

THIS WEEK: Monday, Transocean announces Q4 earnings. Tuesday brings ISM’s latest non-manufacturing PMI and quarterly results from VeriFone. On Wednesday, Staples, American Eagle Outfitters, BigLots! and PetSmart issue quarterly earnings; February’s ADP employment report appears plus a new Federal Reserve Beige Book and data on January factory orders. The Bank of England and European Central Bank wrap up policy meetings Thursday, and a new Challenger job-cut report and earnings from H&R Block, Pandora, Kroger and Smithfield Foods appear. Friday, the February jobs report is out along with earnings from Ann and Foot Locker.