Market Commentary

Relatively good economic news could not overcome
March 31, 2010

Relatively good economic news could not overcome sovereign debt concerns.  Regarding the latter, Greece sold about half of the bonds the beleaguered country offered for sale.  Iceland’s debt ratings were lowered by S & P.  A question that cannot be answered are today’s sovereign debt woes the final chapter of this crisis or the beginning of yet another and more pronounced leg of this potentially unending saga?  

What I did find interesting, however, and as per Moody’s Economy.com tax receipts for the fifteen largest states in the US are expected to rise by 3.9% in FY 2011, the first increase in two years.  Tax collections are expected to rise by 3.5% for all 50 states. Revenue projections are expected to grow if the economy continues to recover.  

Moody’s Economy.com also stated it won’t be until 2013 revenues will return to 2008 levels.  Collection fell by 17% and 7% respectively, last year as compared to 2008 as per the Census Bureau.

As inferred above, stronger economic activity is a reason why revenues are higher than projected.  Spending cuts by the states were also a major factor.

Will or can the US federal government take a similar path—greater revenue via economic activity and lower spending? 

Speaking of economic activity the narrow based Case Shiller Home Price Index rose for the eighth consecutive month.  January’s strong 0.3% gain was unexpected, leaving the year over year decline at a negligible 0.7%.  This index was down 19% year over year twelve months ago and is off by 29% since its 2006 peak.

Commenting briefly about March’s consumer confidence, this sentiment gauge rose to 52.5 from February’s 46.0 reading.  Consensus was expecting a 51.0 reading.  As penned numerous times, I have little regard for consumer sentiment surveys as I believe they are only a feedback indicator offering little predictive qualities.  However with this written a reason why confidence rose was because of a brightening employment picture.

Speaking of which, the much maligned private ADP Employment Survey is released today.  Private sector jobs are expected to rise by 40,000, the first increase since January 2008.  As inferred the correlation of this previous top tier indicator to the national BLS report is low.  However I found the data help limits the possibility of either an upside or downside surprise.

The ADP survey is released today at 8:15.  Other data points posted today is the Chicago Purchasing Managers Index, factory orders and the Milwaukee NAPM.

Last night the foreign markets were quiet. London was up 0.10%, Paris up 0.02% and Frankfurt up 0.17%.  Japan was down 0.06% and Hang Sang down 0.63%.

The Dow should open quiet.  The 10-year is off 1/32 to yield 3.86%.