So Much For The Threats
Another day, another round of contradiction. This is the way of the world. This is the way of the market. Bad news cometh and the market simply blows it off, again.
- Orders for a wide range of U.S.-made capital goods plummeted in September and consumer sentiment weakened sharply in October, signs that a budget battle in Washington has held back the economy.
So what’s up with that? Durable goods, minus aircraft, dropped 1% in September and the August numbers were revised downward. According to the numbers, less folks are buying toasters and Washington machines. Well, I don’t know about washing machines, but my new wife and I just received five toasters as gifts, so how bad could it be out there?
- Boeing Co has secured commitments for around 200 of its 737 Max aircraft, the upgraded variant of its best-selling short-haul planes, from multiple Chinese customers.
So, airplanes are selling well and the customers are coming from China, which is good news, considering the news is still telling us China is causing concern for the market. Another way to look at the durable goods numbers is that building and selling lots of airplanes suggests good things for the employment side of things. It can’t hurt to have commitments to build aircraft totaling some $20 billion.
Still another way to see the durable goods numbers is that everyone panicked a bit when the children in Washington started playing with fire. No one knew if they would burn down the global economy, so businesses and consumers put their money away and waited.
- Economists estimate the shutdown will shave as much as 0.6 percentage point off annualized fourth-quarter gross domestic product through reduced government output and damage to both consumer and business confidence.
Okay, so the breathless media is now telling us to get ready because things are bad, and they will get worse in the fourth quarter, yet the market seems to be ignoring this warning. Yup, the world and the market are full of contradictory behavior.
Perhaps, the market behavior is only contradictory on the surface. Maybe, just maybe, the market understands the reality of what is going on – businesses and consumers pulled back to a degree, but given that the economy is not as bad as the breathless media suggests, both will return to business as usual.
- Shipment volume and forecasts at UPS, along with rival FedEx Corp, are closely watched by Wall Street and considered an indication of overall economic health because of the vast amount of goods they transport.
The above is reality, and so we should look to those two bellwether companies for clues as to how bad it really is out there now and how bad they think it will in the fourth quarter. Yes, let’s take a look.
- United Parcel Service Inc. said increased demand in domestic ground shipments lifted profits in the third quarter and expects online sales to boost shipping volumes as it heads into the holiday quarter.
- For this year’s holiday season, UPS said it expects peak season daily volume to increase by 8 percent, with pick-up volumes for Cyber Monday increasing 10 percent.
- Earlier in the week, rival FedEx forecast an 11 percent rise for the same day.
Fed Ex and UPS are looking for things to get better from both the consumer and business side of things and UPS, at least, is telling us that the last quarter was not so bad from a business perspective. Automobile industry analysts are also suggesting the government created panic will not produce lasting effects on the economy either.
- Analysts forecast October automobile sales in the U.S. will rise to 15.4M-15.5M, from 14.2M a year ago. Edmunds’ Jessica Caldwell thinks sales lost due to apprehension over the government shutdown were made up in the later part of the month.
The projection is for another 1.5 million automobiles will be sold this year and that means auto dealers are reporting that consumers are coming back after sitting tight through August and September.
As well, two other bellwethers for economic output, retail and technology, are reporting things are not so bad out there now and businesses and consumers are prepping for the holiday season.
- Microsoft Corp cruised past Wall Street’s quarterly profit and revenue forecasts on Thursday, helped by strong sales of its Office and server software to businesses, sending its shares up more than 5 percent after hours.
- Shares of Amazon.com Inc. were set to jump about 7 percent at the opening on Friday after the company reported better-than-expected sales growth in North America and indicated strong momentum going into the U.S. holiday season.
Again, keep your eye on the market, as it has its eye on corporate profit and corporate guidance for the fourth quarter. The good news is that the market didn’t fall for Washington’s sleight of hand, you know, when the ideologues got all up in our face and threatened to close down the world economy if they didn’t get their way. So much for that…
Trade in the day; Invest in your life …
