Consumer Sentiment Reigns over Capacity, Production and New York Data

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The U.S. markets had three economic reports to digest this Friday. However, the reports have so far not been enough to sway investors significantly one way or the other as the market continues to struggle to find direction as the DJIA and S&P 500 are close to highs. The markets have ticked up marginally after the University of Michigan consumer sentiment report, but not by enough so far to lead us into thinking that traders and investors will not sneak out early ahead of the Presidents’ Day holiday for a three-day weekend.

A report on industrial production and capacity utilization was released for January. Unfortunately, industrial production was down by 0.1% in January. We need to keep in mind that this is on the heels of a negative fourth-quarter gross domestic product, and that means that the manufacturing base is not contributing to stave off a formal recession. Capacity was at 79.1%, and while that is higher than the average of late, it was down month-over-month since the December capacity use was revised higher to 79.3% from the prior report of 78.8%.

The regional manufacturing data from the New York Empire State Manufacturing Survey was a fresh report for February. This finally came back into positive territory at 10.04. The January report was -7.78, and this was the first positive reading going all the way back to last July. A reading above zero implies expansion, and a reading of less than zero implies contraction. Also in that number, it was hard to not notice that the employment component rose to 8.08 from -4.3 in the prior month. New orders were up big as well, to 13.31 from -7.18. Shipments also rose impressively to 13.08 from -3.08. The general business conditions (next six-month outlook) rose to 33.07 from 22.41.

Another reading came from the Reuters/University of Michigan Consumer Sentiment, showing that the index rose to a preliminary figure of 76.3 for February. That is versus 73.8 in January, and it is above the Bloomberg consensus of 75.0, but also with the 73 to 77 range enough that it may not move the needle very much. To make matters worse, the current index was 88.0, but the expectations were down at 68.7.

After 30 minutes of trading, U.S. investors have to be worried that the rest of the world’s lack of performance could spill over to hurt our gains of more than 6% so far in stocks. Stocks have ticked up based on the University of Michigan sentiment data, but this is ahead of a three-day weekend and many traders will be sneaking out the door before lunch today. The DJIA is up 25 points and the S&P 500 is up two points.

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