Out Fox The $treet

Haven't posted much lately in the 'Future Stat of the Week' column, but that's something I plan to post on more going forward. To determine the direction of the, it's crucial to foresee where the direction of economic data is headed and whether economists have accurately updated expectations. For this week, the key economic stats are the manufacturing data of the Chicago PMI and ISM Manufacturing. Secondary are the consumer confidence reports of the Consumer Confidence Inex and the final University of Michigan Sentiment Index. While all of these numbers are expected to be lower in Sept then Aug, the Manufacturing numbers are sill relatively strong supporting a higher market. The consumer confidence indexes are expected to be lower which could provide an opportunity for an upside surprise. The stock market has been historically strong this September making an assumption of a jump in these indexes as possible. Don't see how they could drop even lower. The jobl...

The ISM Services Index is set to be reported on Tuesday and will be very crucial to the market direction. According to Bloomberg economists expect a whopping bullish reading of 55. Are they serious? The markets are down some 17% and the ISM Services will only fall slightly from the 55.4 in May. Sure July could easily fall off a cliff, but if June is still as strong as a 55 then I don't understand the fears in the market. What gets me is if the number comes in at 54 and the market acts all surprised. To us, even a 54 would be bullish and indicative that the selloff was unwarranted. The consensus range is from 53.5 to 56. Take the low end of the range and don't act surprised. After all the only way to a double dip is for this index to fall consistently below 50. If June doesn't even drop below 54, this economy will need another shock beyond Europe or BP or the China slowdown. Market Consensus Before Announcement The composite index from the ISM non-manufacturing survey in Ma...

One thing explaining the meltup in March is that some analysts are now expecting 300K+ jobs during March. This isn't really a future stat for this week, but its a crucial future stat. Its also likely the first major jobs gain in what could be the start of dozens of months of gains. Brian Westbury from First Trust has a nice video about the expectations for March jobs and more specifically his estimate that we'll report 300K. Now what will that mean to the stock market? Hard to tell as we've had a huge run since mid-Feb. In general though, I still see lots of stocks trading below intrinsic values. Hartford Financial (HIG) trading way below book. AerCap (AER) trading at 5.5x 2010 earnings. Puda Coal (PUDA) trading below 10x their low end guidance of $1.10. Those are just a few examples of how cheap the market remains.

If we've had one theme since starting this blog, its that the leading economic indicators and its primary leader over the last 12 months, the yield curve, is completely thrown aside by most economists and market experts. It shouldn't be though as it continues to forecast a strong recovery. You can fret about a double dip recession all you want, but it isn't going to happen while the LEI and the yield curve is this positive. So why invest for the correction if the signal isn't pointing that way? Anybody following these indicators should know that the yield curve expanded to record levels recently and hence it should be no surprise that the LEI for December expanded at a fast clip yet again. Initial jobless claims also will juice the number. Economists expect a 0.7% rise after 0.9% in November. Two very solid gains. Market Consensus Before Announcement ( Bloomberg ) The Conference Board's index of leading indicators rose a strong 0.9 percent in November, following a...

While all eyes will be on the Jobs report on Friday, the Non-Manufacturing Index will likely show a return to growth after a dip in November according to Bloomberg . The Jobs report on the other hand is expected to come in around -1K which could easily hop over to the positive column. That would probably cause some excitement, but I think having the ISM service report hit over 50 (the estimate is 50.5) and possibly the highest for the recovery would be crucial to signaling this recovery is for real. Till December, the recovery has been all about the rebound in Manufacturing caused by the global recovery in places like Asia. Now if the service sector hits full stride we'll definitely start looking for that strong 4%+ economy. Something that's not in the market yet. Market Consensus Before Announcement The composite index from the ISM non-manufacturing survey weakened in November, declining nearly 2 points to a sub-50 and sub-par 48.7. This composite had been marginally positive ...

Ok these numbers have already been reported earlier today. If time permitted, we would have talked earlier this week about how the expectations were for a 0.7% increase in the leading indicators and nearly a 10% annual growth rate. With all the noise in the market, its important to step back and reflect on how positive these numbers are for the economy. All the worries about the dollar and this and that are just non sense noise. On to the report since we have it already. The Conference Board reported today that the leading indicators actually increased by 0.9%. This was above the expectations of 0.7% as mentioned earlier. The 6 month growth rate is now 4.7% or a 9.4% annual rate. Just slightly below the 5% numbers reported the last 2 months. The interest rate spread ( what we've harked on for a while ), Average weekly jobless claims, Average workweek, building permits, and stock prices continue to remain very positive. Easily off setting the declines in supplier deliveries and con...

Just two weeks ago, Stone Fox Capital talked about the importance of a weekly jobless claims figure below 500K. The number didn't make it reporting in at 505K (502K originally), but that is where the key of understanding the future is a lot of times more important then the number reported. On Wednesday, the consensus estimate for Weekly Jobless Claims by Bloomberg is 495K. The low estimate is an incredible 460K with the high only 500K which would happen on its own to be a low for this cycle. So while the market sweated the number reported last Thursday, it was without doubt that the next sequence of numbers would be lower and possibly much lower just the next week. Don't fight the trend by sweating weekly nuances. Especially considering we're most likely to see sub-400K numbers before the trend even becomes a question. Released on 11/25/2009 8:30:00 AM For wk11/21, 2009 Prior Consensus Consensus Range ...

The trend is your friend and that's acutely important when dealing with economic stats. One very important stat is the Leading Economic Indicators from the Conference Board that comes out on Thursday at 9am. These numbers have been soaring the last 6 months growing at an annual rate of over 10%. The expectations for Oct is that the indicators increased by 0.4% and First Trust estimates 0.5%. Lower then the 1% in Sept but still very solid growth. Until this number turns negative, it's difficult to turn negative on the stock market or the economy. Especially with the indicators growing substantially and the yield curve remaining very high. That combination is a recipe for huge growth and market gains.

Future Stat of the Week is a new focus post by Stone Fox Capital. Too often the market focuses on the current economic stat and not the future direction of the stat. Naturally current reported numbers can impact and will impact the direction of the future number especially at inflection points. Normally though the market sweats over gyrations of a number even though the direction of the economic number is unquestioned. Recently the employment numbers have been the major focus of the market. Both the weekly jobless claims (leading indicator) and the monthly jobless numbers (lagging indicator) are routinely hashed and rehashed by the media. Constantly focusing on the absolute monthly number and not the direction or future number. For the employment numbers, it's highly unlikely that the direction (in this case improvement) will change as long as the FED remains with its accommondating plan. For example: when the weekly jobless claims comes in at 550K when the estimate was say 535K a...