Economic Growth: March's durable goods growth isn't so durable after all
By Adam Lass
In this article
When you strip out commercial aircraft sales from April's Durable Goods figure, you are left with a pretty tepid 1.5% growth rate.
April's Consumer Confidence figure is down 3.88% month over month, missing estimates by more than a point.
The Select Energy SPDR (XLE:AMEX) put on 2.4% today to hit its all time high at $64.57, which means that WOW readers' options contracts against both the XLE and Chevron (CVX:NYSE) also hit highs today.
Economic Growth: March's durable goods growth isn't so durable after all
I can't stand to start yet another column with talk about oil prices. So instead we will take a gander at some of the recent economic “reportage,” starting with the March Durable Goods figures.
If all you do is pay attention to the headlines, then I am sure you are thoroughly convinced that all signals are go, go, go. As usual, when you peel back the lid, you see what a can of worms it really is.
The flashing figure they are plastering across the bottom of your cable news shows is +3.4%! Now I'm as glad as anyone to see some ongoing growth in this key leading indicator. However, When I popped over to the Commerce Department's own site I found that while it did indeed grow, when you add this to last month's +2.4% figure, they still don't balance out January's massive -8.8% loss.
Economic Growth: Boeing's surprise is anything but…
Now let's dig a little deeper: Turns out that non-defense aircraft sales once again make up the bulk of the rise. All well and good for Boeing (BA:NYSE), which “surprised” analysts today with an absolutely lovely profit report.
How this was a surprise to anyone when the past three DG reports showed the sector, which is comprised pretty much of BA, BA, and also BA, and that rose 101% in February and 37% in March, is a mystery to me. And when you strip out BA from the ganged DG figure, you are left with a pretty tepid 1.5% growth rate.
And here's the proof as to just how deceptive that initial “headline” number can be: Durable goods sales are supposed to represent America's relative optimism or pessimism. When the number is truly up, businesses are reinvesting in equipment and families are buying cars and refrigerators. This signal should carry forward at least six to 18 months.
Economic Growth: Consumers losing confidence as gas prices rise
But today we also received what should have been a confirming signal in the form of the April Consumer Confidence report. But instead of a continuing rally here, we see a swing… and a miss. In fact, at 104, CC is down 3.88% month over month, missing estimates by more than a point.
The blame, according to the smart guys at the Conference Board, is the high cost of gasoline. Darn! Here we are back at the junction of gas, oil, and retail again.
I guess there's no avoiding it, so I may as well dive in and get it over with: As I sit to write, oil futures at the NYMEX are up $1,330 to $65.88 a barrel, just a bit closer to $70 than $50, and a heck of a lot closer to $70 than the $30 figure some folks were bandying about just a short while ago.
Economic Growth: Who's drinking champagne… and who's just hung over
The Select Energy SPDR (XLE:AMEX) put on 2.4% today to hit its all-time high at $64.57, which means that WOW readers' options contracts against both the XLE and Chevron (CVX:NYSE) also hit highs today.
And while these guys were able to lift the Dow to yet another new high (10364 last I checked, and a quick “woo hoo!”), I note that such luminaries as Wal-Mart (WMT:NYSE) and General Motors (GM:NYSE) (both WOW short candidates) are showing little or no gains whatsoever.
(Now comes the déjà vu moment, when you'd swear you've heard this before.)
What would you rather bet on: companies that can pull the entire market along like a caboose behind a mighty freight train? Or companies that are sitting like old boxcars on abandoned sidings?
***
Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength's proprietary analysis system, Adam's expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
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Related Resources
Census: Durable Goods Report
Conference Board: Consumer Confidence
NYMEX: Oil Prices