ISM Manufacturing Index Lowest Since June 2009

The ISM manufacturing index broke below 50 in November to come in at 48.6. The consensus range was 49.7 to 51 so this is a negative surprise. This is the lowest reading since June 2009.

New orders plunged -4 points to 48.9, the lowest reading since August 2012. Backlog orders came in 43 and continued their sixth straight month of contraction below 50.

ism-mfg-index november 2015 chart

The S&P 500 priced in the report immediately after its release:

spx-ism-mfg-index-chart

Black Friday Online Spending Rose 10% y/y to $1.66B

ComScore says that Black Friday desktop spending rose 10% year-over-year to $1.66 billion. Thanksgiving day spending rose +9% year-over-year to $1.10 billion. Spending for November 1st to 27th rose +5% year-over-year to $23.4 billion.

ComScore says that while the holiday season opened a little softer than anticipated, Thanksgiving and Black Friday both posted strong online spending totals that surpassed $1 billion on desktop computers and grew at the rate they had expected.

This is also the second straight year that Thanksgiving has established itself as one of the more important online buying days, while Black Friday continues to gain in importance online with each passing year. Looking ahead to Cyber Monday, we expect to see upwards of $2.5 billion in desktop spending as people return to their work computers after Thanksgiving weekend and use some of their down time to continue their holiday gift buying, but without other family members looking over their shoulders.

S&P Futures began trading on Sunday night in the U.S. and are down as of 5:01 PM PT:

sp-futures-11-29-15

Durable Goods Orders Going Sideways

The mainstream financial media is acting as if the 3% gain in Durable Goods Orders released today is somehow like a phoenix rising from the ashes, showing new life to an otherwise dead planet.

Hype and politics aside, the Durable Goods Orders report looks like its going sideways to me. It certainly doesn’t show an economy that is picking up strength. Check out my updated Durable Goods Orders chart that proves this point:

durable-goods-orders-11-25-15

Total shipments fell -1% in October which is not a good start to the fourth quarter with core capital goods shipments down -0.4%.

Retail Sales Barely Gain 0.1 Percent In October 2015

Retail sales rose just 0.1 percent in October; however, when excluding vehicles and gasoline stations, where sales once again fell on price weakness, core sales rose 0.3 percent.

Year over year retail sales are up a respectable +4.1 percent, excluding gasoline stations which is down -20.1 percent and has been badly skewing retail sales all year.

Looking at the chart of Retail Sales tells us something very important that we have to price in to our trading.

Retail Sales October 2015

I think we have to consider the possibility that if the Federal Reserve hikes rates in December, it may be too early for the Federal Reserve to slow the economy and hence we could have the next Bear market. Now we still have one more Retail Sales reports that may be skewed to the upside by holiday shopping but I think we have to start thinking about the possibility that the Fed could error and hike rates too early.

Fed Williams Says Not Raising Rates In October Was a Close Call

Federal Reserve Bank of San Francisco President John Williams, who is a moderate, voting member, said that not raising rates in October was a close call. It is rumored that the official 9 to 1 vote to not raise rates, with Jeffrey M. Lacker as the only vote against, is not representative of what went on behind closed doors and just how close the Fed really was to hiking rates in October.

John Williams went on to say that raising rates sooner, rather than later, will allow for a more gradual tightening campaign. Mr. Williams said that waiting too long introduces a range of risks.

Mr. Williams said that the U.S. is very close to full employment, even with an only 62.7% participation rate. Mr. Williams did say that inflation remains too low but sees it returning to 2% shortly as the GDP comes in at around 2% to close out 2015.

One of the concerns of Mr. Williams is the speed of the housing recovery. A faster housing recovery is one of the upside risks to keeping rates low for too long.