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DATE

RESEARCH REPORT

30-Dec-08

Market Outlook: No Quick Fix
Our sense is that the market is predominantly looking at 2009 with an attitude of, "how can things possibly get any worse?" Accordingly, the prevailing belief is that the stock market is in store for a year of positive returns. We favor that view, although we see 2009 as a period where one will need to be more active than ever in managing investment holdings to capture outsized returns.

21-Dec-09	Market Monitor: Risk Factors We turn our attention to a number of factors that could pose a risk to the positive stock market outlook.
18-Dec-09	The Upcoming Inflation Scare The U.S. is about to enter a period of extremely high inflation growth. However, there is nothing to be worried about. The entire reason for the high prices will be due to the remains of the oil shock.
14-Dec-09	Market Monitor: No Risk, High Reward In our strategy meeting, we discussed why the market has stalled in recent weeks. The consensus view was that money managers simply do not want to take any undue risks right now. For managers who have outperformed their benchmark, there is no need to as a bonus payment awaits.
07-Dec-09	Market Monitor: Seeing a Split Personality The United States equity market appears to be settling down, but whether it is the pause the refreshes or the pause that regresses remains to be seen.
30-Nov-09	Market Monitor: Bonded, but Not Ensured The S&P 500 has risen nearly 70% from its March low and is on track for its eighth monthly gain in the last nine months. With a track record like that, it is easy to think money has been pouring into equity funds. Actually, it has not.
23-Nov-09	Back to Business as Usual for the U.S. Auto Manufacturers? We thought an increase in auto production would be a key component in driving economic growth as the U.S. pulls out of the recession. So far, we have been wrong.
23-Nov-09	Market Monitor: A Peculiar Divergence We recently said we held a bullish short-term view that was predicated on a number of factors that included easy economic and earnings comparisons and anxious money managers fighting to catch up to performance benchmarks. The lack of a warning on asset prices, when the Federal Reserve Chairman had a chance to give one, can be added to the list.
20-Nov-09	Does a Highly Volatile Dollar Affect Asset Prices? Even though a falling dollar may help the broad economy, a weak currency is often thought to harm asset prices and stunt growth. A statistical analysis of stock and bond returns yields the opposite result.
17-Nov-09	Market Monitor: Little Has Changed Our perspective has changed very little over the past 3-5 months: This is a cyclical bull market that has a huge store of uncommitted money to pull in. Corrections will be short-lived and shallow. And the market will be broadly supported by a number of easy comparisons into year end.
13-Nov-09	Does the U.S. Need a Strong Dollar A weaker dollar provides strength and security in an economic recovery. We feel that the government will continue to talk tough about the dollar but provide no direct policy directives to try to change its value.
10-Nov-09	Market Outlook: A Split View In general, we expect the bullish bias that has prevailed since March to persist in the near-term. This is a market, though, where few things should be taken for granted. There is an irreconcilable conflict brewing between the short-term view and the long-term outlook. The former is encouraging. The latter is not.
09-Nov-09	Market Monitor: Easy Money, Easy Rebound Once again, we have seen the market nip its losses in the bud and reclaim a good portion of lost ground in no time at all.
02-Nov-09	Banks Have Hoarding Affliction Banks have plenty of money, they just are not lending it out freely.
02-Nov-09	Market Monitor: What Comes Next? Volatility is one of the few things that looks cheap these days. That is the view we held two weeks ago. Anyone watching last week's action knows that volatility is not as cheap as it used to be.
26-Oct-09	Market Monitor: The Irony of Earnings Season You could not ask for much more as far as the third quarter earnings reporting period is concerned. Well, actually you can. Top-line growth remains deficient in most cases. From an earnings headline perspective, though, things could not be much better.
19-Oct-09	Market Monitor: Still Climbing That Wall The market remains swept up in good news stories, almost to the point of being irrational in its exuberance at times or, at the least, too Pollyannaish with its thinking. To be fair, though, there is room to feel better about things.
16-Oct-09	Mind the Output Gap As the continuing claims number falls, predicting the unemployment rate from the continuing claims data leads to poor forecasts. Instead, it may be better to use the output gap as the leading indicator.
12-Oct-09	The Truth about Economic Survey Indicators While it is hard to dismiss survey indicators when they often push the market on the day they are released, it is important to understand that a long position should not be developed based on a sentiment reading.
12-Oct-09	Market Monitor: Something Has to Give In the near-term, we continue to think the market will grind its way higher, underpinned by the same factors cited above, as well as the recognition that easy comparison periods (and arguably plenty of pleasant surprises) lie ahead in the next few quarters. The longer-term outlook is more problematic in our estimation.
05-Oct-09	Market Monitor: Follow the Leader Something peculiar is happening in the stock market. Bad economic news is actually eliciting a negative response.
28-Sep-09	Market Monitor: Cyclical Bull, Secular Bear Our emphasis remains on favoring quality names at this juncture versus chasing performance in crowded trades.
21-Sep-09	Market Monitor: Data Improves, but Market at Resistance The key positives we see are signs that the improvement in data appears to have some appreciable breadth, with production and sales picking up across the economy, rather than just in the automotive sector.
14-Sep-09	Market Monitor: A Historic Wall of Worry While it is undeniable that many longer-term obstacles sit firmly in our path, the stock market has nonetheless flown higher over recent months on clear signs that the unprecedented fiscal and monetary policy intervention measures have distinctly lowered borrowing costs, stabilized the banking system, and halted the economic "turtling" process across sectors.
11-Sep-09	Are Initial Claims Data Useful for Predicting Unemployment? Initial claims numbers are generally viewed as a leading indicator in forecasting the unemployment rate. But is this true? Can the unemployment rate be forecasted directly from the initial claims data? As it turns out, not very well.
08-Sep-09	Market Monitor: Take a New Aim September has a history and it is not the best history as far as the stock market is concerned. The Stock Trader's Almanac informs us that it holds the distinction of being the worst month for the stock market.
31-Aug-09	Market Monitor: Risk Aversion Lives At this stage of things, though, we are not all that enthused by what we are seeing primarily because what we are seeing is a speculative rush into high beta stocks (or into many of the garbage names if we are to use more pedestrian terms).
24-Aug-09	Market Monitor: The Shape of Things to Come? Short sellers are out of control. That is, they are out of control of the stock market, which has inflicted a lot of pain since early March, and certainly since mid-July, on participants making bearish bets.
17-Aug-09	Market Monitor: Seeing the W Through the V For us, the loss last week was not so much about the downturn as it was about the continued lack of conviction on the part of sellers.
16-Aug-09	Looking at the Jobless Recovery Ahead We are entering another jobless recovery that will be more protracted and have more economic impact than the jobless recovery following the 2001 recession.
10-Aug-09	Market Monitor: Every Rose Has Its Thorn The stock market keeps doing its thing, which is to frustrate the heck out of short sellers and to provide some comfort for long-only investors.
06-Aug-09	Market Outlook: Road Ahead Will Not Be Easy It might be true in business that the second million is easier to make than the first million, but that does not hold true for the stock market. The next 50% will be a lot harder to make than the first 50% -- and it will take a lot longer to make, too.
03-Aug-09	Market Monitor: Target Trading Range Revised Higher If you cry wolf long enough, eventually there will be a wolf. We are not crying wolf here, but we are crying for a short-term correction.
27-Jul-09	Market Monitor: A Case of Cost Cuts, Gridlock and Sentiment Happy days are here again for the stock market, yet a few months down the road we may be looking back and concluding that they were really more like delusional days.
20-Jul-09	Market Monitor: Having Trust Issues The bears were caught by surprise last week as a head-and-shoulders technical pattern in the S&P 500 that came to light with four straight losing weeks had plenty of participants thinking the worst.
13-Jul-09	Market Monitor: An Air of Uncertainty Lead, follow, or get out of the way. Right now investors seem to be getting out of the way, as incoming economic data has gotten them off the primrose path that was in full bloom throughout the spring.
26-Jun-09	Market Monitor: Stuck in a Rut The current market is a challenging one in many respects, not the least of which is the understanding that it cannot seem to make up its mind where it wants to go.
19-Jun-09	Market Monitor: The Wait Is On Things are less bad than before with the economy and earnings prospects. Recent market action (or the lack thereof), however, suggests the market is becoming more disinterested in that view, which is to say it is becoming more demanding of the headlines that drive the market.
12-Jun-09	Market Monitor: Caught Between a Rock and a Range Our belief is that the S&P will stay locked in a trading range between 825-1000.
05-Jun-09	Market Monitor: Speeding Through Potential Roadblocks Green shoots are everywhere -- or so it would seem based on the market's bullish bias that is plainly evident in rising stock prices, rising commodity prices, and rising Treasury yields. The question is do those green shoots have roots?
29-May-09	Market Monitor: A Resilient Market The month of May is over for the market and it was one of the more peculiar months of trading.
22-May-09	Market Monitor: Dollar Ship in Icy Waters "D" is for dollar and "C" is for clobbered, which is what the dollar got this past week. Put the two together and you have "DC," as in Washington, D.C., which sits at the intersection of the market's hopes and fears about the economy.
15-May-09	Market Monitor: Digging In Get it while the getting is good. That was the marching order this past week for a sizable number of companies that came to the market with secondary offerings of stock and debt.
11-May-09	Market Outlook: Time to Settle Down Since its March 6 low the S&P 500 has gained 39%. It gained 5.9% in the week of May 8th alone, as participants breathed a collective sigh of relief that the government's stress tests for the nation's 19 largest financial institutions were not as bad as feared.
08-May-09	Market Monitor: Easy Money Has Been Made The meeting of the minds in this week's Strategy Meeting did not produce a lot of new insight. The reason being is that our views were unchanged from the prior week.
01-May-09	Market Monitor: Getting Carried Away One of the stock market's indefatigable qualities is that it can rationalize anything.
24-Apr-09	Market Monitor: A Period of Wait-and-See It is not often one can say things unfolded exactly as expected, but we will go ahead and make such a claim considering that the S&P 500 closed the week less than 0.1% below where it began the week -- and that is after a 4.3% decline on Monday.
17-Apr-09	Market Monitor: Sailing Toward a Consolidation Period By and large, it can be said that the batch of reporters in the past week did not do any harm to the prevailing view that the worst of the economic slowdown and the financial crisis is behind us. Still, neither the earnings reporters nor the economic data created an impression that it is smooth sailing ahead.
09-Apr-09	Market Monitor: Shying Away from Risk Aversion The first quarter earnings reporting period is upon us and the market, reportedly, is nervous about what it might hear. As we begin here, we are going to put that report to rest.
03-Apr-09	Market Monitor: Market Finds Its Footing The market continues to confirm our view that an intermediate-term market bottom has been reached.
01-Apr-09	Market Outlook: Shaping Up, but Not Ship Shape The first quarter for the stock market was a good walk spoiled by a prevailing sense of uncertainty about the outlook. It was not the start to the new year most market participants had been hoping for. In many respects, it was the start we expected.
27-Mar-09	Market Monitor: A Shift in the Balance of Power In a dramatic reversal of fortune, the hits keep coming for short sellers as the market will log its third consecutive weekly gain, leaving it on track to record its biggest monthly percent gain since March 2000 when it jumped 9.7%.
20-Mar-09	Market Monitor: Floor of Support Has Risen In brief, we think there will now be less attention toward trying to pick the absolute bottom for this bear market and more conviction in initiating, or adding to, positions at a lower cost basis.
13-Mar-09	Market Monitor: The Return of a Rational Market John Maynard Keynes said, "The market can stay irrational longer than you can stay solvent." The good news for money managers is that the market has gotten more rational after the most painful adjustment period most have ever experienced.
06-Mar-09	Market Monitor: A Time to Accumulate Our strategy meeting this past week found us agreeing on one thing. That one thing is that an investable bottom in the stock market is close at hand.
27-Feb-09	Market Monitor: Capitol Hill Pilots Capital Flight When you have to look for direction from Washington each day, you run a heightened risk of falling victim to the over-promise, under-deliver slant.
20-Feb-09	Market Monitor: A Technical Take on Things Plenty of market observers were making note of technical levels in the past week, as key support areas were violated in a broad-based downturn led by none other than the woeful Financial sector, which plummeted 16%.
13-Feb-09	Market Monitor: Confidence Shaken, Not Stirred 007 is as smooth as they come, yet even he might have been rattled by what transpired in Washington this past week.
06-Feb-09	Market Monitor: Banking on a New Bank Recovery Plan Valentine's Day lies ahead, but the coming week should feel more like Christmas because the government is on track (we presume) to deliver some new recovery packages for the Financial sector and the U.S. economy.
30-Jan-09	Market Monitor: Stuck with Uncertainty With the month of January now complete for the stock market, we know a little more. What we do not know -- and what nobody knows for certain -- is how the rest of the year will unfold for the market. History is not kind in this respect, though.
26-Jan-09	Market Monitor: The Cheap Get Cheaper Last week was a historic one for the country with Barack Obama being inaugurated the 44th President of the United States. For the stock market, though, it was another bewildering week that was governed with a sense of uncertainty about the Financial sector and the timing of an economic recovery.
16-Jan-09	Market Monitor: A Sobering Start Any number of expressions can be used to sum up the first half of the new year for the stock market, but "ugh" is the most succinct expression we can think of to sum things up so far.
02-Jan-09	Market Monitor: A Moving Target 2009 is not going to be easy from an economic standpoint or from an investing standpoint. The ingredients seem to be in place for a reflation trade, yet the scale of the deleveraging process presents a fair amount of risk still to the outlook.

30-Dec-10	Data Detail: Jobless Claims - Dec. 19 - 25, 2010 Even if this week's remarkable drop below 400,000 turns out to be an anomaly, the steady decline in the initial claims level over the past few weeks has provided evidence that the labor market is improving.
29-Dec-10	Year in Research Review ‘Tis the season for year-end lists, retrospectives and prognostications. The tradition (for good or bad) has become as much a part of the holiday season as inflatable snowmen, Christmas ties, and an over indulgence of all things chocolate. So, in the spirit of the season, we have put together our "Year in Research Review" list, which highlights some of our top research notes from 2010. Topics range from commodity price inflation to the convergence of yields to the super consumer.
28-Dec-10	Data Detail: Consumer Confidence - December 2010 Perplexing. Confounding. Confusing. Head scratching. These are all adjectives that should be used to describe the unexpected decline in the December reading of the Consumer Confidence Index. Thankfully, however, "the start of a new trend" or "a new weakness is developing within the consumer" are not likely explanations for the December drop.
27-Dec-10	Fixedated: Dec. 20 - 24, 2010 Treasury yields ended the holiday week slightly higher on fairly muted action and may have found a near-term trading range. High-yield corporates outperformed their investment-grade counterparts, while munis captured headlines as one analyst called for massive defaults over the next 12 months. We do not agree with the assessment.
23-Dec-10	GDP Monitor: Dec. 20 - 24, 2010 As we wrap up the final month of 2010, it is nice to know, not only are we finishing on a high note, but the sectors that are leading charge -- consumption, equipment and software investment -- are healthy and sustainable.
23-Dec-10	Data Detail: Claims, Durables, PCE, Home Sales, (Nov-10) As we have stated before, and are glad to state again, the "Super Consumer" charges ahead and continues to be the main leader of the economic recovery.
22-Dec-10	Data Detail: GDP - Q3 2010 - Third Estimate After all was said and done, the difference in economic output over the last two quarters had only to do with inventory growth. Pessimists would see this as weakness in the recovery. However, optimists would look at this as a sign of stronger confidence in demand in the quarters ahead.
20-Dec-10	Fixedated: Dec. 13 - 17, 2010 The Treasury selloff did not hold as a rally that started last Thursday left the 10-year Note basically unchanged week-over-week. The rally plays into our previously stated belief that continued volatility will breed opportunity. Word is starting to circulate now that the BABS program will be recreated in some form after the first of the year. We echo that sentiment.
17-Dec-10	GDP Monitor: Dec. 13 - 17, 2010 The risk to our 2011 forecast from inventory changes became a little clearer this week as retailers reported a surprise cutback in inventory levels. We knew that inventory growth needed to decelerate, and it now looks more likely that the slowdown is occurring in Q4 2010 as opposed to some time in 2011.
16-Dec-10	Data Detail: Housing Starts (Nov-10), Claims (Dec 11) After witnessing a surge in the normally stable single-family construction sector, it should be no surprise that many economists have upped their housing starts forecasts for December. However, starts are only a part of the construction picture. The number of housing units currently under construction has remained the same for the previous three months. This gives an indication that builders are not yet ready to boost actual production.
16-Dec-10	Trend Watch: Nov. 29 - Dec. 10, 2010 In this Trend Watch, we discuss the first major U.S. index poised to regain its 2007 highs, as reported versus operating earnings, increased M&A activity in 2011, the relationship between municipal bonds and Treasuries, and the potential for increased automobile production.
15-Dec-10	Data Detail: Inflation (Nov-10), Production (Nov-10) Producer prices continue to pick up steam. Yet, firms remain in a difficult position in that they cannot pass on those higher prices to consumers without facing adverse reactions from consumers. In order to maximize their profits, firms are going to have to examine their pricing decisions in the coming year.
14-Dec-10	Data Detail: Retail Sales - November 2010 The consumer-led recovery remains on track as the 2010 holiday sales period started off on strong footing. While the fourth quarter is shaping up to be one of the strongest consumption periods since the recovery began, we are beginning to wonder if there will be a significant drop-off in spending after the new year.
13-Dec-10	Fixedated: Dec. 6 -10, 2010 Treasuries continued to slide last week as the 10-year ended at 3.32% -- its yield is up nearly 80 bps in just five weeks. The move is being driven partially by an increasingly positive economic outlook. However, we do not discount the idea that some investors are getting out before U.S. debt becomes "the" story. From our vantage point, volatility will be strong enough to warrant moving in and out of positions in the near term.
10-Dec-10	GDP Monitor: Dec. 6 - 10, 2010 The consensus believes the lowering of the Social Security payroll tax rate will boost consumption and thus GDP by 0.7 - 1.0 percentage points in 2011. That type of growth seems uncharacteristic of recent consumer behaviour. We think a minor upgrade to 2011 GDP is more probable.
10-Dec-10	Data Detail: Trade Balance - October 2010 The weakness in the dollar, which many media pundits have been complaining about for the past few months as a sign of deteriorating economic prosperity, has allowed U.S. exporters to experience their best month since August 2008.
06-Dec-10	Fixedated: Nov. 29 - Dec. 3, 2010 Helped by a disappointing employment report, Treasuries rallied back sharply on Friday, but could not hold onto the gain. Corporates took a hit as well as the YTW on both high-yield and investment-grade bonds rose to levels not seen since August and September, respectively. Europe remains a bit of guessing game as every bailout simultaneously applies a patch for today while exposing the lack of a long-term solution and Germany's growing uneasiness with its role. Treasury auction demand metrics bear watching this week.
03-Dec-10	Institutional Long Equity Allocation - Q3 2010 In aggregate, institutional investors made modest weighting changes to their long equity allocation in Q3 2010 relative to the S&P 1500. Institutional investors remain overweight consumer discretionary, health care and technology, and continued to show a preference for small- and mid-cap shares relative to the S&P 1500 weighting.
03-Dec-10	GDP Monitor: Nov. 29 - Dec. 3, 2010 For the past 12 months, our medium-term economic view has called for sluggish growth in 2011 followed by a more moderate recovery in 2012. At the same time, we expected unemployment to remain near 10.0% for most of 2011. None of that has changed. In fact, the November employment report only added to the evidence that supports our view.
03-Dec-10	Data Detail: Employment Situation - November 2010 After staring at the headline employment numbers, it is difficult to get a feeling other than disappointment in the lack of job creation in November. However, the fact is that the payroll numbers are in-line with the low-growth scenario we have been predicting for the past year.
02-Dec-10	Data Detail: Jobless Claims - Nov. 21 - 27, 2010 While we still believe that the initial claims level is on the verge of reaching an inflection point where payroll gains can experience unimpeded growth, firms pushed back during the week ending November 27, introducing more layoffs. Still, the growth in initial claims looks more likely to be due to normal volatility patterns.
01-Dec-10	Data Detail: Construction (Oct-10), ISM (Nov-10) While new construction spending has waned, spending on home improvements has soared. Unfortunately for homebuilders, as more homeowners choose to improve their current home, it leaves a smaller potential buyers pool for a new home. As a result, sales may weaken and leave builders with higher inventory levels or force them to continue to cut back on new construction.
01-Dec-10	Trend Watch: Nov. 15 - 26, 2010 In this Trend Watch, we discuss a possible convergence between the prices of new and existing homes, reasons to buy California's debt, the U.K. increasing its holding of U.S. debt, a net neutrality spat, and an expansion in global drilling despite increasing regulation following the BP oil-rig disaster.
30-Nov-10	Data Detail: Consumer Confidence - November 2010 The recent growth in the employment sector, combined with a stronger performance in the equity market helped drive consumer confidence in November to its highest level since June 2010. As we expect the economy to continue to rebound, future employment sector gains should keep consumer confidence inching higher.
29-Nov-10	Fixedated: Nov. 22 - 26, 2010 Treasuries saw a wide trading range last week as yields were pushed higher by good economic data and weak auction results and pulled lower on European debt concerns. At this point, the safety trade may be the only thing supporting low Treasury yields. Corporates were weaker across the board. Munis managed to rally back a bit after the prior week's sell-off.
26-Nov-10	GDP Monitor: Nov. 22 - 26, 2010 No matter how strong the economic data come in over the next several months, positive GDP growth will have a very difficult time overcoming the expected negative contribution from a deceleration in inventories.
24-Nov-10	Data Detail: Claims, PCE, Durables, Home Sales (Oct-10) During an employment recovery, the initial claims level needs to fall into a "recovery zone" where payroll growth outperforms normal cyclical job trends. Typically, the upper bound in the recovery zone is about 400,000. At this level, nonfarm payrolls grow in excess of 100,000 per month. For the first time since the recession ended, the initial claims level has fallen to the upper bound of this range.
23-Nov-10	Market Monitor: No Real Surprises in FOMC Minutes The minutes of the November 2-3 Federal Open Market Committee meeting produced few surprises. That was not a surprise because the views expressed by Fed officials leading up to that meeting and the views expressed by Fed officials after that meeting were well known to market participants.
23-Nov-10	Data Detail: GDP - Q3 2010 - Second Estimate Newly-revised third quarter GDP data showed a much stronger economy than previously reported and continued to show that the economy is moving in the correct direction. However, we do not expect growth in excess of 2.5% to continue into the fourth quarter.
22-Nov-10	Fixedated: Nov. 15 - 19, 2010 The fact that Treasury yields did not push lower across the board last week amplifies how much less significant the safety trade -- as it relates to Treasuries -- has become even as Ireland and Portugal steal the headlines. Germany is flexing its muscle in the bailout talks, as we believe it should. The 10-year AAA muni broke through 3.00% -- it ran above 3.00% until early July when the 10-year Treasury was at 2.95% (close to its current level).
19-Nov-10	U.S. Economic Outlook - Q4 2010 With low growth on the horizon, the Federal Reserve has enacted a second round of quantitative easing in an attempt to spur the economy. With demand for credit down and banks still holding tight to their excess reserves, it is uncertain at this time if the quantitative easing will have its intended effect. The U.S. economy is growing below its potential and is expected to continue to do so in 2011. However, we believe there is greater upside risk than downside risk to our conservative economic outlook.
18-Nov-10	Data Detail: Jobless Claims - Nov. 7-13, 2010 The latest initial claims report might not have produced much of a surprise relative to the consensus estimate, yet it has provided surprisingly good news for the labor market as claims held below the 450,000 level for the second straight week without any special factors. This is the claims report that will factor into the November employment report. That should set an encouraging tone given that initial claims were at 455,000 in the week that factored into the October employment report, which subsequently showed a 159,000 increase in private-sector hiring.
17-Nov-10	Data Detail: Inflation (Oct-10), Housing Starts (Oct-10) Producer and consumer price trends are moving in opposite directions, which does not bode well for future profitability. Producers continue to face an upward-moving commodity price path, but slack in the labor market and the concurrent decline in income make it extremely difficult to pass-through the higher commodity prices to consumers.
16-Nov-10	Data Detail: Industrial Production - October 2010 The manufacturing sector continues to be a main source of economic activity as the economy continues to struggle to gain its footing during the recovery. While manufacturing still has a long way to go before output and capacity utilization reach normal levels, it is definitely on the right track and shows few signs of potential weaknesses.
15-Nov-10	Data Detail: Retail Sales - October 2010 With all of the so-called problems with the consumer, including high debt loads and a heightened unemployment rate, it would seem that a consumer led recovery would be the most improbable growth scenario. Yet, that is exactly what has happened over the last five quarters, and after the October retail sales report, it looks to continue into the foreseeable future.
15-Nov-10	Fixedated: Nov. 8 - 12, 2010 Treasuries took a hit all along the curve last week as the market began to see the end of the road for QE2 support. However, the 30-year sale was not the Titanic-like situation it was made out to be. Corporates were weaker across the board, but high-yield has noticeably outperformed over the last two months. California will be out with a debt sale scheduled to reach nearly $14 bln. We expect good demand despite budget woes.
12-Nov-10	GDP Monitor: Nov. 8 - 12, 2010 The revised data from last month continues to roll in at stronger-than-expected levels. While we still believe that growth will remain sluggish through most of 2011, the surprises have definitely shifted from the downside toward the upside.
10-Nov-10	Trend Watch: Oct. 25 - Nov. 5, 2010 In this Trend Watch, we discuss the super consumer, increasing crude oil prices and their possible impact on alternative energy stocks, potential unlocked value in REITs, and Toyota's declining market share.
10-Nov-10	Data Detail: Jobless Claims (Nov 6), Trade Balance (Sep 10) Following 12 grueling months of stable initial claims data, the labor sector may finally be reaching a turning point as the claims level broke below 440,000 for the first time since the beginning of the recession. When coupled with the 151,000 increase in nonfarm payrolls in October, the employment sector finally looks like it is on a stable upward trend.
09-Nov-10	Financial Review: Fed Surveys Show a Lack of Loan Demand It will be interesting to see if the demand for credit, and the willingness to extend credit, increases in the wake of QE2, which occurred after the Senior Loan Officer Survey was conducted. While QE2 has started to stoke higher inflation expectations, the October survey is a reminder that broad inflation pressures should remain subdued for the time being. A separate report from the New York Fed indicated consumers were clearly in a deleveraging mind-set in 2009. If it persists, the U.S. economy seems likely to continue to grow below its potential which, in turn, should keep inflation pressures in check.
08-Nov-10	Fixedated: Nov. 1 - 5, 2010 Treasuries showed just how volatile they can be as participants struggled to define the risk factors currently in the market. The 30-year took the brunt of the selling and its upcoming auction could be interesting. Corporates continued to catch a bid as the investment-grade and high-grade indices we follow saw their yields head lower. The ML U.S. HY Mstr II Index is now just 27 bps away from its 10-year YTM low. European debt issues may be reaching another tipping point as Germany looks to mitigate future problems.
05-Nov-10	GDP Monitor: Nov. 1 - 5, 2010 The first GDP forecast for a quarter usually entails a lot of guess work. Most of the data in the third quarter pointed toward a similar view for the fourth quarter. However, the October employment report offered a new perspective. Private payroll growth may have finally reached an inflection point where future growth is not only expected but assured. As a result, it could generate stronger-than-expected consumption forecasts and drive GDP growth toward 3.0% in the near term.
05-Nov-10	Market Monitor: Free of Risks, but Not Risk-Free With the outcome of the midterm elections and the Federal Reserve's quantitative easing strategy now known, some key risks for the market have been eliminated, yet this is not a risk-free environment. We take a look at some additional near-term risks for the market, yet come back to the idea that there is still a wide gap between the forward four quarter earnings yield for the S&P 500 and the 10-year note that points to a value proposition in owning stocks versus bonds for the long term.
05-Nov-10	Data Detail: Employment Report - October 2010 A large schism has developed between sectors that are still feeling the squeeze from the recession - which explains the stable claims data - and those that are expanding. We can now say with assurance that the expanding subset is outperforming the weaker sectors by a wide margin and should continue to foster growth over the coming months.
04-Nov-10	Data Detail: Jobless Claims - Oct. 24 - 30, 2010 The biases from the Columbus Day Holiday were removed this week, and instead of pointing toward a trend of fewer layoffs, initial claims simply returned to the 450,000 - 500,000 range that they have stubbornly stuck between since November 2009. The lack of a downward move leaves little hope for a substantial positive surprise in tomorrow's employment report.
01-Nov-10	Data Detail: PCE (Sep-10) Construction (Sep-10) ISM (Oct 10) The personal income and spending report from the final month of the quarter is typically a redundant report as the data have already been aggregated into the third quarter GDP numbers. As a result, the report normally lacks new information on how the economic recovery is proceeding. However, the September data revealed a new trend in savings that could have a profound effect on long-term economic growth.
01-Nov-10	Fixedated: October 25 - October 29, 2010 Treasuries sold off last week on concerns that QE2 will not be as big as the market had hoped, but they recaptured about half of their losses by Friday. Corporates were mixed for most of the week, but closed out Friday basically unchanged. Munis gave up a bit of ground as the FactSet 10-year AAA yield broke through the 2.70% level for the first time since August 16. The big stories this week will be the elections and the "will he, won't he, and how big will the ring be" storyline of QE2 (FOMC meeting Wed).
29-Oct-10	GDP Monitor: Reconciliation with Q3 2010 GDP GDP growth accelerated in the third quarter, but still remains below the 2.7% - 3.0% needed to foster employment growth. Until GDP reaches this level, households will continue to feel as if the recession has not ended due to elevated unemployment levels, even though economic output has increased for five consecutive quarters. At the same time, the details of the GDP data do not showcase a single sector that could lead the U.S. into that type of a recovery.
28-Oct-10	Data Detail: Jobless Claims - Oct. 17 - 23, 2010 The hope that businesses finally decided to refrain from introducing more layoffs was dashed as the strongest initial claims level in over three months was negated by poor seasonal adjustment factors.
27-Oct-10	Trend Watch: Oct. 11 - 22, 2010 In this Trend Watch, we discuss the weaker dollar, a possible inflection point in private nonresidential construction spending, the effect of strong 2010 earnings results on 2011 earnings expectations, and corruption, taxes and the return (again) of sovereign debt fears.
27-Oct-10	Data Detail: Durable Orders (Sept-10), Home Sales (Sept-10) The latest durable goods report highlights the fact that the ISM report is an unreliable indicator for the manufacturing sector. While the ISM suggests the manufacturing sector is on unstable footing, the durables report shows production should remain steady for the foreseeable future. We updated our third quarter GDP forecast for the final time prior to Friday's release. Our forecast was revised up from 1.3% to 1.5% on stronger-than-expected growth in durable goods inventories.
26-Oct-10	Data Detail: Consumer Confidence - October 2010 As the Conference Board's Consumer Confidence Index and the University of Michigan Consumer Sentiment Index Confusion diverge, the data suggest that consumers are left in a listless state of confusion.
25-Oct-10	Fixedated: October 18 - 22, 2010 Treasury yields have continued to hold at low levels even as equities have rallied and money has flowed into commodities. The message? All is well -- so long as the Fed releases QE2 next week to receptive audiences around the world.
22-Oct-10	GDP Monitor: October 18 - 22, 2010 Finally, the advance estimate for third quarter GDP will be released at the end of next week. After an up-and-down quarter, our GDP forecast ended close to where it started.
21-Oct-10	Data Detail: Jobless Claims - Oct. 10 - 16, 2010 The latest jobless claims report continued to reinforce the notion of a jobless recovery. On the surface, the initial claims level posted a moderate weekly decline. However, the level remains bounded between 450,000 and 500,000 as it has since November 2009.
20-Oct-10	Market Monitor: Think Globally, Act Locally (Supplement) In a follow-up piece to our report last Friday that examined the international sales exposure of companies in the Dow Jones Industrial Average, we have provided a breakdown of each component's exposure based on specific geographic segment data reported in their most recent 10K filing. Additionally, we have provided price-to-earnings and dividend yield data for each of the Dow 30 companies.
19-Oct-10	Data Detail: Housing Starts - September 2010 For the past several months, irrational expectations or possibly delusions of grandeur have led the construction sector into building more homes even though sales and demand have, at best, stalled. The data from September seem to reveal that homebuilders have come back to a more rational approach as future construction looks to be more in-line with consensus sales expectations.
18-Oct-10	Financial Review: Q3 2010 Bank Earnings and Sept. Trust Data The third quarter earnings reporting season began in earnest last week. Three major financial institutions have already released results -- JPMorgan Chase, GE Capital and Citigroup. We continued to look for improvements in the credit and lending market that would provide a read on credit demand. Bank earnings thus far, as well as Friday's September Trust data from banks and credit card companies, told us two things: 1) there is both statistical and anecdotal evidence that demand for loans has stopped declining and 2) credit quality continued to improve in the form of decreasing net charge offs.
18-Oct-10	Data Detail: Industrial Production - September 2010 For the past several months, the ISM manufacturing index has slowly decelerated, finally reaching a point where production growth was hedged solely upon gains in new orders. Due to the volatility in new orders growth, a one-time drop in orders could have a pronounced negative effect on manufacturing production. That seemed to happen in September.
18-Oct-10	Fixedated: October 11 - 15, 2010 Treasury yields pushed lower early in the week, but reversed course on generally good economic data and earnings reports. Corporates were mixed as high-yield debt continued to attract attention while investment-grade yields sold off with Treasuries. Munis were near their lows for the year as demand remained high for top deals.
15-Oct-10	Market Monitor: Think Globally, Act Locally Market pundits continue to push the investment opportunities available outside the U.S., namely in the emerging and developing economies of Asia and Latin America. Large-cap, U.S. companies with global brands and reasonable earnings multiples offer a conservative pathway to investing in those regions since their sales prospects are linked to the faster-growing economies, and not the fast-money financial markets, of the emerging and developing nations. In this report, we take a look at the Dow 30 and specifically at their international exposure. We also highlight other multinational companies that have strong global brands and market share position that will enable them to benefit from the economic growth outside the U.S.
15-Oct-10	GDP Monitor: October 11 - 15, 2010 While there was nothing abnormal in the headline inflation data, the details -- specifically the way higher producer food prices were not able to be passed through to consumers -- increased the probability of deflation in 2011.
15-Oct-10	Data Detail: Inflation (Sep-10), Retail Sales (Sep-10) The discrepancy between the producer and consumer inflation data in September only enhances the theory that the U.S. economy is more likely headed toward a deflationary environment than an inflationary one.
14-Oct-10	Data Detail: Jobless Claims (Oct. 9), Trade Balance (Aug-10) Strong demand for imported consumer goods in August put a dent into our theory that a weaker dollar would contribute to a lack of import growth, and with it, a decline in the trade deficit. Instead, firms and consumers alike seem to have discounted currency moves and related price increases when making decisions on where to buy.
13-Oct-10	Trend Watch: Sept. 27 - Oct. 8, 2010 In this Trend Watch, we discuss the differences between U.S. economic projections from the Federal Reserve/IMF and their potential impact on any further quantitative easing, the effects of austerity measures on GDP, the effect of GDP expectations on the stock market, and the potential for a good third quarter earnings season to be already priced into stocks.
11-Oct-10	Fixedated: October 4 - 8, 2010 Treasuries had another strong week on data that pointed to a sluggish economic recovery and the belief that another stimulus package is on the way. The 2- , 3- , 5- , and 7-year Notes all touched record lows. High-yield and investment-grade corporates both showed gains as well. The ML U.S. 7-10 Yr Corp A index hit an all-time low of 3.70% on Friday (12-31-96 inception). Munis trended sideways while demand for new paper remained strong last week. Treasury auctions, another round of QE, and Q3 earnings will be the focuses for the week.
08-Oct-10	GDP Monitor: October 4 - 8, 2010 While the employment data do not feed directly into our GDP model, the failure of private payroll gains to offset the loss of government jobs is a little disconcerting for our medium-term forecast. The lack of job growth increases the likelihood of a second round of quantitative easing, which has the potential of increasing our short-term outlook before a payback period develops in 2011.
08-Oct-10	Data Detail: Employment Report - September 2010 The September employment report revealed the opposing sides to the future of the economic recovery. On the "hands off" side, private payroll growth continued unimpeded, albeit at a slow pace. On the quantitative easing side, chronic mismanagement at the state and local government levels wiped out all of last month's private sector gains. With fiscal stimulus out of the picture until after the midterm elections, the Federal Reserve will have to make a decision on which side is more likely to drive the economy over the next several months.
07-Oct-10	Data Detail: Jobless Claims - Sept. 26 - Oct. 2, 2010 After a couple of weeks of near misses, the initial claims level finally broke through the 450,000 barrier for the first time since May and seemingly ended months of malaise in the weekly employment data. However, as much as we would like to break out the champagne and make plans for a ticker-tape parade, the move is largely symbolic and does not necessarily suggest new hiring growth is just around the corner.
06-Oct-10	The U.S. Employment Situation: the Good, the Bad, the Ugly It is easy to listen to the media and think that the employment situation failed to improve following the end of the 2007 recession. Yet, by almost every measure, the recovery in the labor sector following the 2007 recession is moving at a quicker pace than it did following the recoveries after the 1990 and 2001 recessions. Moreover, it is only just slightly weaker by many measures than the recovery after the 1981 recession.
04-Oct-10	Fixedated: September 27 - October 1, 2010 Treasuries could not hold onto their lowest levels of the week, but still ended on a positive note on mixed economic data. Investment-grade and high-yield corporates both gained last week as issuance -- and appetite -- remained high. The ML U.S. High Yield Mstr II Index yield reached yet another 52-week low while the ML U.S. Corp 7-10 Yr "A" Index is only 8 bps from its own 52-week low. Muni yields ended the week slightly higher and the 10-year FactSet AAA muni rose to 105.2% of the 10-year Treasury (2.65% vs. 2.52%, respectively).
01-Oct-10	GDP Monitor: Sept. 27 - Oct. 1, 2010 The personal income, spending and construction data from August showed marked improvement compared to consensus expectations. At first glance, this data would seemingly confirm that the economic recovery was growing faster than anticipated. However, that would be the wrong conclusion. This week's data actually proved that faster growth will be a struggle in future quarters.
01-Oct-10	Data Detail: PCE (Aug-10) Construction (Aug-10) ISM (Sep-10) As much as we would like to believe that the stronger-than-expected growth in income, spending, and construction expenditures in August was the start of an accelerated growth phase, the details of the data confirm that the new found growth only occurred because the government decided to open up the till and hand out money.
30-Sep-10	Data Detail: Jobless Claims - September 19 - 25, 2010 After experiencing one week of seemingly unusual volatility, the initial claims level rebounded and returned to the 450,000 claimant level that it had settled at during the first two weeks of September.
29-Sep-10	Negative TIPS Yields Are Nothing to Worry About As the 5-year TIPS yield has been periodically falling below zero, we have been hearing reports that the move is signalling the market's belief that the Fed has lost control over monetary policy and that deflation is imminent. Do not believe those reports.
29-Sep-10	Trend Watch: Sept. 13 - 24, 2010 In this Trend Watch, we discuss two uses of corporate cash, the comparison between President Obama's approval rating and the S&P 500, and the "exchange-rate war" and its impact on U.S. multinationals.
28-Sep-10	Data Detail: Consumer Confidence - September 2010 Just as the character Howard Beale famously said in Network, "I want you to go to the window, open it, stick your head out and yell: ‘I'm as mad as hell, and I'm not going to take this anymore!'," consumers are listening and reacting to the negative political messages being broadcast about the economy.
27-Sep-10	Fixedated: September 20 - 24, 2010 Treasuries rallied last week as the 10-year reached a 2.48% before retreating to a 2.61% on Friday as equities ran higher on solid durable goods numbers and a general turn in sentiment. The Treasury will reenter the markets this week with three major auctions (2-, 5-, and 7-year Notes). Corporates were mixed. Investment-grade debt saw a nice rally while high-yield bonds basically treaded water. Munis trended back toward their low yields for the year as participants snapped up last week's new issues.
24-Sep-10	Market Monitor: The End of a Sovereign European Vacation? Sovereign debt issues in Europe are festering again, particularly with respect to Ireland. However, could the rising cost to protect against Ireland defaulting on its debt be the work of speculators more than anything else? We address that question and provide some performance data that might be helpful for risk management strategies tied to the idea that the sovereign debt issue in Europe is going to become a bigger issue again.
24-Sep-10	GDP Monitor: September 20 - 24, 2010 While business investment and housing data returned from previous lows this week, the overall growth trend has not deviated from our long-term viewpoint. We see a spike in GDP in the third quarter and a return to the sluggishness experienced in Q2 2010 in the fourth quarter.
24-Sep-10	Data Detail: Durable Orders (Aug-10), Home Sales (Aug-10) While the headline durable orders data may seem to suggest a weakening in economic activities, the fact is that the August durable orders report struck another blow against the notion that the economy is headed for a double-dip recession...Seasonal adjustment factors added a bonus to both new and existing home sales level in August, making the monthly growth rate seem stronger than it actually was.
23-Sep-10	Data Detail: Jobless Claims - Sept. 12 - 18, 2010 Once the Census Bureau removed all of the temporary workers from the payroll, we expected that the initial claims level would fall below the 450,000 bound due to decreasing layoffs in the private sector. Given the latest data, the evidence now points to census workers having little to no effect on the heightened claims level while the private sector has seen continued layoffs.
21-Sep-10	Data Detail: Housing Starts - August 2010 Even though the NAHB sentiment index remains close to its all-time low, signaling poor future growth, homebuilders decided to increase the number of new homes started in August. The seemingly irrational disconnect between homebuilder sentiment and their near-term sales expectations is a perfect example of the confusion that remains in the residential investment sector.
20-Sep-10	Fixedated: September 13 - 17, 2010 Though the trading range for the 10-year Note was about 20 bps for the week, Treasuries ended relatively unchanged. Decent economic data and a lack of sales kept things in check. With no major auctions on the agenda this week, news out of Europe and the FOMC meeting will drive the action. Corporates saw good gains for the week as the ML U.S. HY Master II Index YTW reached another 52-week low. Munis continued to grind sideways on moderate sales. This week may provide several larger new issues for participants to tackle.
17-Sep-10	Market Monitor: Heed the Earnings Yield Sign Based on the math of the Fed model, stocks look quite cheap relative to bonds right now. The problem is that the market does not believe in that math because uncertainty about global economic conditions has it doubting that earnings estimates are achievable. However, if one subscribes to the view that a double-dip recession will not come to fruition and that a deflation trap will be avoided, it is worth considering value-based investment strategies that utilize the earnings yield as a starting point. To the latter end, we have screened all S&P 500 members for their earnings yield, separating them by sector and ordering the components in each sector from highest earnings yield to lowest earnings yield.
17-Sep-10	GDP Monitor: September 13 - 17, 2010 This week's data confirm our viewpoint that a positive shock to both consumption and net exports will cause a strengthening in third quarter GDP. At the same time, though, the data overshadow productivity losses that will cause the weakness that occurred in Q2 2010 to return in the fourth quarter.
17-Sep-10	Data Detail: Inflation - August 2010 Analysts and economists were looking for new disinflationary trends in the August inflation reports that would suggest consumers or producers are entering a deflationary cycle. So far, the reports show a weakening in price growth, but there is no evidence as of yet that suggests price will turn negative for an extended period.
16-Sep-10	Institutional Long Equity Allocation - Q2 2010 Institutional investors overall made modest changes to their long equity allocation in Q2 2010 relative to the S&P 1500. Institutional investors continued to show preference for small- and mid-cap shares relative to the S&P 1500 weighting. In aggregate, institutional investors are overweight consumer discretionary, health care, technology and materials compared to the S&P 1500.
16-Sep-10	Data Detail: Jobless Claims - Sep. 5 - 11, 2010 We believed that the trend in the initial claims level should have started moving in the downward direction this week, especially after the number of temporary census workers remaining on payroll shrunk to roughly 15,000. However, firms remain overly cautious regarding future consumer demand and layoffs seem to have continued unabated.
15-Sep-10	Trend Watch: Aug. 30 - Sept. 10, 2010 In this Trend Watch, we discuss a potential silver lining to the first negative capital stock reading since World War II, the catalyst for the recent surge in the Chinese renminbi, and what companies are telling the government about the expiration of the Bush tax cuts.
15-Sep-10	Data Detail: Industrial Production - August 2010 All of the talk regarding the sluggish economic recovery and specifically the doom and gloom in the manufacturing sector took a back seat to another strong and steady data point as manufacturing production continued on its upward trend in August.
14-Sep-10	Data Detail: Retail Sales - August 2010 Last month, strong headline consumption data masked a weakening in the core spending base that we expected to drive a consumer-led slowdown in economic growth this fall. However, the data in August countered that viewpoint and revealed a consumer that was much stronger than we had anticipated.
13-Sep-10	Fixedated: September 7 - 10, 2010 Treasury yields rose sharply as the 10-year rose from a low last week of 2.56% to close at 2.79% -- its highest yield since hitting 2.82% on August 9. Corporates were mixed. High-yield bonds gained and investment-grade debt sold off with Treasuries. The ML U.S. HY Mstr II hit its lowest yield (8.05%) since April 30, 2010. Munis held their own again on slim supply over the holiday-shortened week.
10-Sep-10	GDP Monitor: September 6 - 10, 2010 Even though the data this week were impressive regarding third quarter GDP growth, they created some uncertainty about how the economy is going to perform over the next few quarters.
10-Sep-10	Sovereign Debt: Focus Shifts to Ireland The €750 bln eurozone aid package briefly narrowed sovereign spreads this summer, but did little to cure the region's underlying debt problems. Risks are now resurfacing in Ireland, which faces rising spreads and the failure of nationalized Anglo Irish Bank. This is likely just the first such reminder we should see over the medium term as the mountain of bad paper has nowhere left to go.
09-Sep-10	Data Detail: Jobless Claims (Sep 4), Trade Balance (July-10) While the initial claims level remains bounded between 450,000 and 500,000, which has been the case since the middle of November 2009, the move toward the lower bound brings added hope that the labor market is finally showing signs of breaking out of its malaise...The paradox of strong GDP growth yet weak economic demand may come to fruition in the third quarter as the net export sector surges ahead.
07-Sep-10	Fixedated: August 30 - September 3, 2010 Treasuries were whipsawed last week as the 10-year Note and the 30-bond Bond traded within spreads of more than 29 bps and 36 bps, respectively. High-yield corporates rallied a bit while investment-grade company debt followed Treasuries and ended the week slightly off after moving through the 4.00% yield level earlier in the week. Munis were relatively unchanged on light supply.
03-Sep-10	GDP Monitor: August 30 - September 3, 2010 The economic data were clearly disappointing last week. Things quickly changed this week, though, as better-than-expected consumption, manufacturing output, and employment data reversed the needles and pointed back toward a stable recovery.
03-Sep-10	Data Detail: Employment Report - August 2010 After reading through the details of August's employment report, it is clear that the labor market, while still sluggish, is improving at enough of a clip that it should prevent a double-dip recession.
02-Sep-10	Data Detail: Jobless Claims - August 22 - 28, 2010 The labor market continues to run in place as claims remained bounded between 450,000 and 500,000 as they have been since the middle of November. There is nothing in the labor data that suggests substantial job growth is on the horizon, but there is some inkling that new firings may fall in the near future.
01-Sep-10	Data Detail: ISM Index (Aug-10), Construction (July-10) Economists have been so downbeat regarding the economy over the past few months that it seems whenever a piece of economic news surprises to the upside, like today's ISM report, suspicion arises. After looking at the underlying details, those suspicions are unfounded.
01-Sep-10	Trend Watch: August 16 - 27, 2010 In this Trend Watch, we discuss the relationship between earnings growth and the safety trade, homebuilders outperforming the market despite very weak housing data, and the potential effects of "hardship withdrawals" from retirement accounts.
31-Aug-10	Data Detail: Consumer Confidence - August 2010 Worries about a potential double-dip recession seem to be more of a concern for market analysts and media commentators than the consumer, as the consumers surveyed by the Conference Board strengthened their viewpoint that the future economic outlook is brightening.
30-Aug-10	Data Detail: Personal Income and Spending - July 2010 After weeks of tepid economic data, the personal income and spending report offered a nice respite. Unfortunately, the strengthening economic data look to be fleeting, at least for spending.
30-Aug-10	Fixedated: August 23 - 27, 2010 Treasuries sold off hard last Friday after rallying to yields not seen since January 2009. The ML U.S. 7-10 Yr. Corp. A Index yield fell to 3.93% -- within 8 bps of its all-time low -- before ending the week at 4.09%. Muni yields continued to grind lower as demand outstripped light supply.
27-Aug-10	Market Monitor: How Now Dow Dividend Payers? Just like the U.S. government, the companies in the Dow Jones Industrial Average are not going out of business anytime soon; only most of the Dow companies offer a better yield and more attractive, long-term capital appreciation potential than U.S. Treasuries. In fact, 24 of the 30 Dow components have a dividend yield that exceeds the yield on the 5-year Treasury note while 18 of them have a dividend yield that exceeds the yield on the 10-year Treasury note.
27-Aug-10	GDP Monitor: August 23 - 27, 2010 It is hard to look around the fact that this week's economic data was anything short of lousy, but even though many economists have upped their double-dip recession forecasts, the historical trends point toward a more temporary blip than another leg down in economic activities.
26-Aug-10	Data Detail: Jobless Claims - August 15 - 21, 2010 A breakout from the ongoing stagnation in the labor market remains elusive as the initial claims level fell during the week, but remained firmly grounded between 450,000 and 500,000 claimants as it has done just about every week since the middle of November 2009. There has been nothing to suggest that the claims level will suddenly strengthen and fall below the lower bound any time soon.
25-Aug-10	Data Detail: Durable Orders (July-10), Home Sales (July-10) On the surface, the manufacturing numbers provide more evidence that the economic recovery is not only weakening, but is much closer to a turning point that would signal a double-dip recession. However, in order to come to that conclusion one would have to discount the orders trend that has stabilized over the past 10 months and continued in July...After reviewing July's abysmal home sales data, there can only be one conclusion: the payback period following the expiration of the homebuyers' tax credits will not be moderate.
23-Aug-10	Fixedated: August 16 - 20, 2010 Yields, in general, continued to trend lower indicating concerns about a big equity sell-off and/or another freeze in the credit market IF, in fact, the bond market is correct. The 10-year Treasury made a push to 2.50% late last week while the 30-year briefly broke the 3.60% mark. The continued move lower in yields is concerning on a number of levels. One concern we think is underappreciated, though, is the interest rate risk. Corporate yields also headed lower as the ML 7-10 Yr Corp A Index pierced 4.00% for the first time since June 2003. Muni yields dropped again as investor demand outweighed supply.
20-Aug-10	GDP Monitor: August 16 - 20, 2010 This week's economic data confirm the view that the economic recovery is weakening, but it has not yet reached a point where we would consider the possibility of a double-dip recession. We readjusted our inventory forecast higher for the third quarter due to the gains in producer prices, and now expect GDP to increase 0.9%, up from 0.7%.
19-Aug-10	Data Detail: Jobless Benefits - August 8 - 14, 2010 We are left wondering how much of the growth in claims is actually due to a weakening in the labor sector as opposed to the reduction in temporary census workers. After adjusting for the lost census workers, the initial claims level not only broke free of the 450,000 to 500,000 bound, but it deteriorated below 400,000 - a level that normally fosters employment growth.
18-Aug-10	Trend Watch: August 2 - 13, 2010 In this Trend Watch, we discuss U.S. Treasuries and China, the potential for deflation and for a double dip, the details of the rebounds at GM and Chrysler, and using "apps" for data collection.
17-Aug-10	Data Detail: Starts (July), Inflation (July), IP (July) All three economic data reports (housing starts, inflation, and industrial production) contained encouraging headline data. However, the details of each report reveal a lack of sustainability.
17-Aug-10	Financial Review: Slowly Improving Credit and Lending Market Two releases yesterday, the Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices and trust data from credit card companies and banks, point to a slowly improving credit and lending market.
16-Aug-10	Residential Construction Outlook: Wave of Inventories Ahead During the first few months of the year, housing starts accelerated as homebuilders took advantage of low inventory levels and what was thought to be increased demand for new homes. That seems to have been a mistake. Using simple calculations, we determined that inventory levels can easily exceed previous highs by the end of the year as sales demand shrinks. Fortunately, it is very unlikely that a seizure in construction following an inventory spike will be strong enough to pull the U.S. back into a double-dip recession.
16-Aug-10	Fixedated: August 9 - 13, 2010 Treasury yields moved substantially lower last week on weak economic data, deflation concerns, double-dip talks and the Fed's announcement that it would keep its balance sheet constant by using MBS proceeds to buy Treasuries. Corporates ended the week mixed as investment-grade bonds grinded lower and high-yield debt continued to give up ground. Johnson & Johnson's issued debt at record low yields last week. However, the real story was the spread at which the deal got done. When JNJ issued 10-year debt in June 2008, it did so at a spread of 103 bps. This deal came at +43 and traded down to +15 for block size on Friday. The FactSet 10-year muni index has dropped 28 bps in six weeks and is once again over 100% as a percentage of Treasuries as participants have snapped up the limited high-grade supply.
13-Aug-10	Market Monitor: Certain about Uncertainty The Fed added to the market's uncertainty in the past week, not so much in our estimation with the decision it made, which is supportive for risk assets, but by the seemingly confused manner in which the Fed arrived at that decision. As the uncertainty looms, the stock market will remain volatile with risk trades placed one day and taken off the next. Nonetheless, against a backdrop of low inflation that is going to remain low, low interest rates that are going to remain low, earnings that will continue to grow, and a Fed that is endorsing risk, the stock market still has its appeal.
13-Aug-10	GDP Monitor: August 9 - 13, 2010 The headline growth level in the retail sales report was in-line with our estimates, but the details suggest consumption growth may be slower in the second half of the quarter. As a result, our GDP estimate for Q3 was revised down from 1.0% to 0.7%.
13-Aug-10	Data Detail: Retail Sales - July 2010 On the surface, the rise in July's retail sales figure suggests that the consumer is spending again. However, the details point in the opposite direction, one where the consumer remains weak and spending growth may be fleeting.
12-Aug-10	Data Detail: Jobless Claims - August 1 - 7, 2010 On the surface, this week's jobless benefits data reveal more of the same. The initial claims level has remained stubbornly bounded between 450,000 and 500,000 since the middle of November 2009. However, the fact that claims have not risen above the 500,000 level over the past few months may be a sign that the labor market is actually stabilizing, if not improving.
11-Aug-10	Data Detail: Trade Deficit - June 2010 Under normal circumstances, an increase in the trade deficit would signal a growing need for manufacturing inputs and/or a rise in consumer demand for consumption goods. Yet, in June we already saw data that revealed a slowing manufacturing sector and a weakening consumption base. Therefore, the rise in the trade deficit seems to be more of an anomaly than a sustainable trend.
09-Aug-10	Fixedated: August 2 - 6 , 2010 Treasuries rallied hard on Friday's poor employment report after meandering sideways for most of the week. Renewed talk about additional quantitative easing, as well as the specter of disinflation (or deflation), helped to support a move to lower yields. Corporate debt issuance continues to be strong as companies take advantage of low yields and high demand to strengthen their balance sheets. As investment-grade corporate yields head lower, we have become increasingly focused on dividends as an income play. Separately, munis mostly treaded water on low new issuance. We continue to see relative value in BABS when compared to corporate debt.
06-Aug-10	Market Monitor: Risk on, Risk off The stock market is riding a wave of sentiment where the risk trade is on one day and off the next. While this condition is apt to persist and lead to a range-bound market, we see a benefit in utilizing a barbell strategy in the near term where positions are increased in cyclical sectors when the risk trade is off and positions are increased in counter-cyclical sectors when the risk trade is on, taking advantage of price weakness in both instances. Although there is still a good deal of uncertainty to deal with, things are less bad than they were a few months ago when stock prices were higher. That condition, coupled with reasonable valuation and low interest rates, is why we would continue to be long equities.
06-Aug-10	GDP Monitor: August 2 - 6, 2010 There was nothing in the detail of the Q2 2010 GDP data that suggested we should alter our view on next quarter's growth. We still believe that consumption will lead the recovery effort along with gains in investment spending. Net exports and government spending growth will drag.
06-Aug-10	Data Detail: Employment Report - July 2010 The headline numbers from July's employment situation report leave an uneasy feeling that the labor market malaise will remain for quite some time. Yet, digging through the details provides a sense of modest relief that a double-dip recession is not coming up on the horizon.
05-Aug-10	Data Detail: Jobless Claims - July 25 - 31, 2010 It is possible that the jump in initial claims was largely the result of census workers filing for unemployment. The lack of growth above 500,000 may suggest that the private sector is finally entering a period of stability.
04-Aug-10	Trend Watch: July 19 - 30, 2010 In this Trend Watch, we are calling attention to the potential effects of government layoffs at the state and local level to the national unemployment rate, the Federal Reserve's options regarding its mortgage-backed securities' holdings, renting versus owning a home, and a proposed California tax change that could have a national impact.
03-Aug-10	Data Detail: Personal Income and Spending - June 2010 There is not any new information to report following the personal income and spending data release for June. The Bureau of Economic Analysis incorporated the data into the second quarter GDP release.
02-Aug-10	Data Detail: ISM (July), Construction Spending (June) Given the ISM details, we feel the talk of a potential double-dip in manufacturing activities is being overplayed. We would need to see weaker data before we alter our thinking on that point...The construction data were included in last week's GDP data. Accordingly, there really was not any new information to be gleaned about the second quarter from this report.
02-Aug-10	Fixedated: July 26 - 30, 2010 Demand at last week's Treasury auctions was a bit sporadic -- average 2-year, great 5-year, and a weak 7-year. While Q2 corporate earnings continue to be strong, the Treasury market does not seem to agree that everything else is coming up roses. Both high-yield and investment-grade corporates rallied for the week. The ML 7-10 Yr "A" Corp Index hit its lowest yield since July 1, 2003. Income investors should note there are attractive dividend yields available from a variety of companies including Merck (MRK), DuPont (DD) and ConocoPhillips (COP) to name a few. Munis hit a roadblock as the FactSet 10-year AAA Index stalled at 2.86% all last week -- a level it first reached on July 21. BABS continue to offer some value as 10-year AAA Columbus came at 3.89% vs. 10-year Microsoft (MSFT) and Johnson & Johnson (JNJ) at 3.10%.
30-Jul-10	Market Monitor: It Is Earnings Appreciation Day Ahead of the June quarter earnings reporting period, the stock market got tripped up on concerns about the earnings outlook. With roughly two-thirds of the S&P 500 having reported earnings results, it can be said that those concerns were overblown. While we are not pounding the table on the stock market outlook (yet), we are not cutting the legs out from under it either. We cannot because the earnings growth is too solid to do so.
30-Jul-10	GDP Monitor: Reconciliation of Q2 2010 GDP Since it is not feasible to reconstruct the historical data with the new revisions until after the BEA releases its supplemental detail reports on Tuesday, we cannot determine what our forecasts would have looked like if the revised data were known to us.
30-Jul-10	Data Detail: GDP - Q2 2010 - Advance Estimate The Bureau of Economic Analysis included its annual benchmark revisions in the Q2 2010 GDP forecast, and it lent credence to what many people on Main Street were already thinking: the recession was deeper than originally expected and the recovery effect has been a little slower.
29-Jul-10	Data Detail: Jobless Claims - July 18 - 24, 2010 After two weeks of volatility in the initial claims level that were rooted in biases in the seasonal adjustment factors, we are finally receiving our first clear picture of the labor market in July. Unfortunately, the data are painting a picture that looks eerily similar to what the market has been experiencing for the past nine months.
28-Jul-10	Data Detail: Durable Goods Orders - June 2010 Looking past the headline value reveals a solid business environment. Growth in both new orders and shipments of nondefense business capital excluding aircraft remained in the black. Even though consumer confidence is slipping, businesses remain unconcerned that a double-dip recession may be brewing in the immediate future.
27-Jul-10	Data Detail: Consumer Confidence - July 2010 July is turning into a very scary month for consumers as employment anxieties and fears of a double-dip recession weigh heavily on consumer attitudes. Fortunately, weaker confidence numbers do not necessarily mean a lack of consumption growth. Overall, we continue to expect personal spending to remain steady.
26-Jul-10	Data Detail: Home Sales - June 2010 We have received a second month of data regarding the payback period following the homebuyers' tax credits, and the data suggest that the sales numbers may not be as grim as once thought.
26-Jul-10	Fix-ated: July 19 - 23, 2010 Treasuries sold off into the end of last week as the risk trade picked up a bit on solid earnings reports and the European banking sector's not-so-stressful test that contained no surprises. Other high-grade investments continued to do well as the MMA AAA 10-year Muni Index hit its lowest level in over nine years and the ML 7-10 Yr "A" Corp Index reached its lowest yield since March 19, 2004. We believe there are some attractive dividend yields available now.
23-Jul-10	Market Monitor: Q2 Earnings Reporting - Act Two Entering the week, we were resigned to the idea of using interim signs of strength to reduce exposure to cyclical sectors. After a flood of Q2 earnings reports and guidance, we are resigned to putting an end to that strategy as those reports made it clear the U.S. is not headed for a double-dip recession. In turn, we consider the idea that the biggest risk to the stock market today is not a meltdown in stock prices, but a melt up in stock prices.
23-Jul-10	GDP Monitor: July 19 - 23, 2010 Quarterly updates to our import/export pricing models tightened our trade-deficit estimates and subtracted almost a full percentage point from GDP. As a result, our GDP estimate for Q2 was revised down from 4.0% to 3.0%. While the economic news in the housing sector was worse than expected, it had only a minor influence on our GDP forecast.
22-Jul-10	Data Detail: Jobless Claims - July 11 - 17, 2010 The discrepancy between today's business activities and a normal business environment has left the seasonal adjustment factors out of synch, suggesting that any changes in claims is more than likely just noise and not the beginning of any new trend.
21-Jul-10	Trend Watch: July 5 - 16, 2010 In this Trend Watch, we recommend the Utilities sector for professional investors looking for yield and would take profits on the recent move lower in the dollar/higher in the euro. We are also calling attention to the ongoing enterprise cycle in the tech sector and preview the upcoming midterm elections.
20-Jul-10	Data Detail: Housing Starts - June 2010 Going off of the starts data, one would think that the sector was moving in the wrong direction. However, that is a bit of a misnomer as the data more accurately reveal a sideways trend.
19-Jul-10	Financial Review: Q2 2010 Bank Earnings The results last week from JP Morgan, Citigroup, Bank of America and GE Capital, as well as June trust data, confirmed that credit losses are easing and that provisions are moving lower. Although the release of reserves has raised concerns about the quality of earnings being reported, those concerns have mistakenly overshadowed the more important aspect of the reports, which is that credit quality is improving. What remains missing, though, is loan demand.
19-Jul-10	Fix-ated: July 12 - 16, 2010 Treasuries, high-yield and investment-grade corporates, and municipal bond yields all rallied last week as equities ended the week lower. Municipals have seen significant gains over the past month. The 10-year FactSet AAA has moved 32 bps lower. The ML "A" 7-10-year Corporate Index and the ML U.S. HY Mstr II Index have moved 59 and 63 bps lower respectively. We continue to believe that "second-tier," investment-grade corporates -- like GE (GE), Kraft (KFT), Verizon (VZ) -- offer the best value. Goldman Sachs' (GS) 5-and-10-year bonds are now trading back to pre-indictment levels, but still offer some relative value. There has been talk that European sovereign debt fears are calming, but we do not believe that the recent auctions by Spain, Portugal, and Greece, or the action in U.S. Treasuries, supports that idea.
16-Jul-10	Market Monitor: Q2 Earnings Reporting - Act One There was plenty of drama surrounding the first week of earnings reporting for the June quarter. In particular, economic data clashed with generally reassuring earnings guidance, leaving the market inclined to think earnings expectations are still too high. Seeing how things played out, we remain wedded to our view that interim signs of strength in the stock market present an opportunity to reduce exposure to cyclical sectors.
16-Jul-10	GDP Monitor: July 12 - 16, 2010 Our Q2 2010 GDP forecast was revised down from 4.4% to 4.0% after the net export deficit widened more than anticipated. While the data this week lowered our economic outlook, it actually showcased a much stronger recovery. A rise in investment will keep our long-term projections on target and possibly improve them if productivity grows faster than we expect.
16-Jul-10	Data Detail: Inflation - June 2010 Commodity prices continue to be at the heart of the deflationary moves in the indexes. Oddly, though, the reason for the drop in headline prices was different for both. Energy prices were the main driver in lowering consumer prices while weaker food prices contributed to declining producer prices.
15-Jul-10	U.S. Economic Outlook - Q3 2010 There are ample risks associated with today's economic uncertainty. However, we do not envision a double-dip recession materializing. GDP is expected to increase 3.0% in 2010 and 1.7% in 2011. The inventory contribution to GDP is expected to fall from 1.4 percentage points in 2010 to zero points in 2011. The lost inventory contribution makes up the entire difference between our 2010 and 2011 GDP forecast. Economic output should weaken in the second half of 2010 and persist through the middle of 2011 as the inventory cycle winds down, import growth strengthens as dollar volatility induces demand for foreign goods, and consumption weakens after a portion of the Bush tax cuts expires. Led by a return in consumption and investment in equipment and software, growth returns to potential in the second half of 2011.
15-Jul-10	Data Detail: Claims (July 10), Ind. Production (Jun-10) Today's data highlight the necessity to look at the details rather than just the headline number. The entire initial claims decline can be explained by poor seasonal adjustment factors. Likewise, manufacturing production turned negative for the first time since February, but that was due to the moratorium on drilling in the Gulf and weakness in motor vehicle manufacturing.
14-Jul-10	Data Detail: Retail Sales - June 2010 After driving GDP growth in the first quarter of the year, the consumer has definitely lost some of its momentum over the past couple of months. While we anticipate that consumption growth will remain positive for the remainder of the year, the strength of its contribution to GDP will be weak unless the private sector opens up its doors and starts to rehire.
13-Jul-10	Data Detail: Trade Balance - May 2010 While the growth in the deficit will lower our second quarter GDP forecasts, the details of the data actually reveal a strengthening economic recovery. Imports of core business capital outperformed export growth and the gains in business investment following the strong shipments data for nondefense capital goods excluding aircraft remained intact.
12-Jul-10	Fix-ated: July 5 - 9, 2010 Treasury yields finally softened a bit as the 10-year rose nearly 10 bps last week in reaction to the stock market's rally. Corporate bond investors shifted favor to the high-yield sector as the ML HY Mst II Index rallied from a 9.07% to a 8.85% yield for the week. The 10-year AAA muni finally broke through the 3.00% barrier and closed the week out at 2.94%. Q2 earnings and Treasury auctions should drive the action this week.
09-Jul-10	GDP Monitor: July 5 - 9, 2010 After stronger-than-expected growth in merchant wholesaler inventories our Q2 2010 GDP forecast was revised up from 4.1% to 4.4%. We anticipated that wholesale inventories would follow the downward trend revealed in last week's manufacturers' level. While wholesale petroleum inventories fell 6.0% in May, the remaining sectors more than offset the loss.
09-Jul-10	Market Monitor: Q2 Earnings Season With the stock market having been hit hard in recent weeks on earnings concerns, there is a realistic prospect of a relief rally during the Q2 earnings reporting season. Should one occur, we would be selling into the strength, reducing exposure to cyclical sectors. Conversely, we recommend increasing allocation to counter-cyclical sectors where volatility is lower and dividend yields are generally higher.
08-Jul-10	Data Detail: Jobless Claims - June 26 - July 3, 2010 While the jobless report was fairly bland, we are beginning to worry about the lost income from the extended benefits. If extended benefits decline by 3.3 mln by the end of July, we could see a combined 0.2 percentage point drop in income due to the lost benefits over the next several months. This could be a significant hindrance to consumption growth and we may need to revise our third quarter forecasts as a result.
07-Jul-10	Trend Watch: June 21 - July 2, 2010 In this Trend Watch, we are calling attention to central banks buying the euro and selling the dollar, an economic indicator that argues against deflation, the catalyst for second quarter earnings season, and the current relationship between investment-grade corporate bonds and Treasuries.
06-Jul-10	Fix-ated: June 28 - July 2, 2010 With the 10-year Treasury yield back to its April 2009 level, we are starting to wonder if there really was a recovery. With muni and high-grade corporate yields moving lower, selective high-grade debt is looking attractive again. We believe it is prudent for investors to start to consider the ramifications of what the possible fixes to the European debt crisis might look like and how they may impact the market.
02-Jul-10	Market Monitor: Warning Signs A number of indicators are flashing warning signs that the market is bracing itself for an economic slowdown. The unanswered question is, will it be a slowdown or will it be a recession? Either way, we are recommending reducing exposure to cyclical sectors.
02-Jul-10	GDP Monitor: June 28 - July 2, 2010 Weaker-than-expected growth in manufacturers' shipments more than offset stronger-than-expected consumption and construction data as Q2 2010 GDP was revised down from 4.2% to 4.1%. While durable inventory growth remained strong, nondurable manufacturers had the worst-performing month since November 2008 as inventories declined 2.1%. We expect a modest rebound next month.
02-Jul-10	Data Detail: Employment Report - June 2010 The drop in hours and wages may be a bigger cause of concern than the sickly payroll numbers. It seems that firms are producing beyond current demand requirements, and, as a result, inventories may be stockpiling too quickly. The weakness in weekly earnings suggests that firms are cutting production and the data lead us to believe that we may be witnessing a precursor to further declines in retail sales over the coming months.
01-Jul-10	Data Detail: Claims (Jun-26) Construct (May-10) ISM (Jun-10) The overall weakness of the economic recovery was evident in the jobless claims, construction spending, and ISM reports. While a double-dip recession remains a low probability, the data underscore that the economy is not growing at rates that most economists predicted at the beginning of the year.
29-Jun-10	Data Detail: Consumer Confidence - June 2010 The Conference Board's Consumer Confidence Index tanked in June. In doing so, it fueled concerns about there being a big downturn in consumer spending and a double-dip recession in the U.S. Both concerns are misplaced knowing confidence readings take a distant backseat to income when it comes to spending.
28-Jun-10	Data Detail: Personal Income and Spending - May 2010 The personal income and spending report for May provided some encouraging markers for future spending activity. At the same time, it showed inflation remains subdued and that there should not be any undue concern about the FOMC raising the target range for the fed funds rate anytime soon.
28-Jun-10	Fix-ated: June 21-25, 2010 Treasury yields moved lower last week even as the auction results were mixed. We believe there is more risk than reward in Treasuries at this point. The FactSet AAA 10-year Muni ended the week at over 100% as a percentage of Treasuries (3.14% vs. 3.11%), but that speaks more to the power of risk aversion than it does to the cheapness of munis. We recommend staying selective in corporates as the ML HY Mstr II Index has regained 51 bps since June 10.
25-Jun-10	GDP Monitor: June 21 - 25, 2010 A greater-than-expected rebound in business capital shipments along with strong inventory investment pushed our second quarter GDP forecast up to 4.2% from 3.8%. After a lack of shipments in nondefense business capital excluding aircraft in April, we anticipated a moderate rebound in investment spending. Surprisingly, business demand came in at much greater levels than expected and pushed our equipment and software growth forecast up to 19.1%.
25-Jun-10	Data Detail: GDP - Q1 2010 - Third Estimate Even though the negative revision was unexpected, the fact that GDP remained near its potential 2.8% long-term growth rate will not alter our view about the stability of the economic recovery. While economic growth may be subdued, the probability of a double-dip recession continues to be remote.
24-Jun-10	Data Detail: Durables (May-10), Jobless Claims (June 19) More importantly, the growth in domestic business capital came during a time of global weakening and a strengthening dollar. As a result, we expect that a majority of these purchases will remain in the U.S. for domestic use. Therefore, long-term economic growth potential remains strong...Since the middle of November, the initial claims level has stubbornly remained bounded between 450,000 and 500,000 claimants every week. Time and time again we have looked for signs of a breakout, but it keeps eluding us as firms remain willing to cut costs by reducing their labor needs.
23-Jun-10	Trend Watch: June 7 - 18, 2010 In this Trend Watch, we are calling attention to a leading indicator that must not be overlooked, a new currency policy in China that may not have the intended result the market is expecting, the hoarding of cash by U.S. businesses, and the notion that land-line Internet service may be headed the way of the dinosaurs.
23-Jun-10	Data Detail: Home Sales - May 2010 If it were up to the reactions by the media and equity markets regarding the housing sales data, a double dip in housing would no longer be considered a possibility but a reality. In truth, the weakness in the data should fuel concern that the housing sector is teetering on edge, but hard conclusions will not be able to be made until at least after the July data are released.
21-Jun-10	Credit Check: Loan Demand Remains Depressed More than a year and a half after the credit market froze, the consumption and extension of credit has yet to normalize fully. There are signs of improvement, but the extension of credit is being negatively impacted by weak demand. This environment is unlikely to change in the near term for a number of factors, from over-leveraged consumer balance sheets to concerns over the economic outlook to tight lending standards and ongoing regulatory uncertainty. Credit growth is not a prerequisite for economic growth, so we recently raised our near-term GDP forecast due to a positive shift in net export growth. High unemployment and a weak credit market, however, will serve as headwinds over the medium term. At a time when money is "free," the great paradox is that demand remains depressed.
21-Jun-10	Fix-ated: June 14-18, 2010 Treasuries finished last week where they began as yields were contained by lackluster economic data and ongoing eurozone fears. The ML HY Mst II Index yield has moved down 46 bps since June 11 -- the biggest one-week move since September 2009 -- and is now back to late-May levels. The 10-year AAA still failed to break through the top of its 3.09%-3.20% range that it has been in since April 27. With regards to BP, we would hold, but not add to, bond positions.
18-Jun-10	GDP Monitor: June 14 - 18, 2010 Weaker-than-expected housing starts data caused a dip in our GDP growth forecast for the second quarter from 3.9% to 3.8%. There is no clear answer on why builders shut down on new construction. One conclusion is that it is a simple ease following four strong months of growth. However, it is also possible that builders overshot on their demand estimates and became worried that they may have too much inventory stock in the coming months.
18-Jun-10	Market Monitor: An Ultimate Fight for the FOMC The FOMC will not be raising the fed funds rate when it convenes at its next meeting. In fact, the FOMC may not raise the fed funds rate for quite some time, choosing instead to begin a tightening cycle with alternative measures first. Either way, history should prove again that it is worth owning dividend-paying stocks ahead of the first tightening action.
17-Jun-10	Data Detail: Jobless Claims (June 12), Inflation (May-10) As much as analysts would like to discount the claims numbers as an inaccurate reading of the employment situation, the sideways movement provides more evidence that the 218,000 increase in private nonfarm payrolls in April was an outlier. The data suggest that we should expect payroll growth in the 40,000 - 60,000 range instead, and anything above this level would a surprise bonus for the month...The inflation data for May provide further affirmation that the Fed will be on hold for some time yet. Inflation pressures are simply not a problem at this juncture. The trend in both PPI and CPI is clearly one of disinflation, which is apt to stoke commentary about a possible turn to a deflationary environment.
16-Jun-10	Data Detail: Housing Starts (May-10); Production (May-10) Clearly the drop in May's housing starts level was a disappointment. However, it is possible that the drop in starts is a simple easing after three out of four months of growth. Starts increased 14.4% from December to April 2010 and were due for a pullback as the industry gets a better grasp of the housing situation following the tax credit....It should be noted that the moratorium on drilling has had a limited effect on the manufacturing data thus far. Oil well drilling production posted no growth in May, but we anticipate this data point will turn significantly negative over the next couple of months as the suspension is in place. Therefore, a significant drop in production next month due to the oil sector may cause the headline manufacturing number to fall, but it will have no bearing on the stable growth prospects of the rest of the industry.
16-Jun-10	Credit Card Trust Data -- May 2010 The May data provide further evidence that the peak in charge-off rates occurred during Q1 2010. Even a gradual ease in charge offs over the remainder of 2010 will be welcome as companies will be able to release reserves at the same time. That adds earnings power at a time when the industry is dealing with regulation issues.
14-Jun-10	Fixated: June 7-11, 2010 Treasuries traded in a wide range last week, but ended basically flat. All three auctions saw average demand as low yields tempered the safety trade. Corporates were weaker as the ML HY Mstr II Index reach its highest yield (9.40%) since April 27. We reiterate our stance that we would not add to, or initiate, positions in BP or RIG -- but we would not be sellers either. The best relative values right now may be in state-backed municipal debt.
11-Jun-10	GDP Monitor: June 7 - 11, 2010 We raised our forecast for Q2 2010 real GDP this week, increasing it 0.5 percentage points to 3.9%. The change was primarily due to businesses unexpectedly turning to foreign sources for their investment needs.
11-Jun-10	Data Detail: Retail Sales - May 2010 The retail sales numbers came in as a negative complete shock. Yet, the details of the report paint a different picture. Instead of pointing toward the beginning of a negative spiral in consumption spending, in essence the premature ending of the super consumer, the report was actually very benign.
10-Jun-10	Data Detail: Jobless Claims (June 5), Trade Balance (Apr-10) The fact is the lack of a significant downward trend in jobless claims is going to make it extremely difficult for stable employment growth. We saw this last month when claims remained at or above their March levels and it resulted in a major disappointment in nonfarm payroll growth....On the surface, a drop in imports of industrial supplies would suggest that manufacturing is overheating and future production may be curtailed until demand for the sector's products catches up. However, imports of core capital goods increased by $1.6 bln, which reveals strong growth in equipment and software investment.
09-Jun-10	Trend Watch: May 24 - June 4, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal of identifying emerging trends that have the potential to shape investment decisions.
07-Jun-10	Fix-ated: June 1-4, 2010 Treasuries rallied into the weekend on a poor payrolls reports and a new concern in Europe (Hungary). The 10-year yield went below 3.20% last Friday after breaking the 3.40% level on Thursday. Investment-grade corporates performed well while investors continued to approach high-yield debt with caution. BP and RIG bonds continued to get battered. We would hold their respective debt, but remain cautious about adding to or initiating positions as the liability picture is still cloudy.
04-Jun-10	GDP Monitor: May 31 - June 4, 2010 We raised our expectation for real GDP growth in Q2 2010 due to stronger-than-expected construction data and motor vehicle sales. Currently, we are forecasting a 3.4% increase versus a prior outlook of 3.2%. We anticipated that builders constructing smaller homes would result in slower growth in residential construction expenditures than in the past.
04-Jun-10	Data Detail: Employment Report - May 2010 The market may attempt to discount the employment report as an outlier or a possible payback period following last month's strong employment numbers. This view would discount the weakness shown in the claims data and ADP report. In reality, the employment report provides evidence that the U.S. is struggling through a long-term jobless recovery. The outliers may prove to be more like April's data, strong growth in the face of difficult underlying data.
03-Jun-10	Data Detail: Jobless Claims - May 23 - 29, 2010 As we look toward tomorrow's nonfarm payrolls release, the latest jobless claims data do nothing to reassure the market that the payroll number is going to be strong. Instead of a strengthening labor market that analysts have been clamoring for, the claims data reveal a labor market that has been stagnate for eight weeks.
03-Jun-10	Housing Market: Volume and Price Pressures Remain As the payback period subsides, we expect total housing sales to return to their pre-tax credit levels, showing a bottom in sales has been reached. However, at this level supply pressures still outweigh demand, and pricing may remain in a deflationary trend.
02-Jun-10	Bond Investors Drill BP and Transocean Overall, the pressure on shelf drilling is supportive of our investment theme: "Commodities -- A Structural Imbalance." While widened bond spreads look bad, they have been exaggerated by the 10-year Treasury yield moving lower. At the same time, the risk of a BP dividend cut is limited in our view. We would hold BP and RIG debt here, but would not add to positions.
01-Jun-10	Data Detail: Construction (Apr-10), ISM (May-10) Total construction expenditures rose 2.7% in April, their strongest monthly gain since August 2000. Combined with the gains in March, construction posted its first two-month growth period since late 2007.... At first glance, the ISM Index for May suggests a weaker manufacturing sector than in April. The index fell from 60.4 in April to 59.7 in May and barely beat expectations of a reading of 59.4. However, the details of the data reveal stability at a heightened growth level.
01-Jun-10	Market Monitor: S&P 500 Valuation - Q2 2010 The S&P 500 has had a setback of late, yet it is 63% above its March 2009 recession low. Despite the recovery run, most valuation metrics for the S&P 500 remain below their 10-year average. The technology, health care, telecom, and consumer staples sectors look particularly attractive relative to historical measures.
01-Jun-10	Fix-ated: May 24-28, 2010 Treasuries made a run at the 3.00% level early last week before settling back to the 3.25%-3.30% range as the weekend approached. We continue to believe there is more downside risk than upside potential in Treasuries. High-yield corporates may have finally levelled off. The ML High-Yield Mstr II Index went from 7.96% on April 28, to 9.33% on May 26, before settling at 9.07% to end the week. Refinancing risk could become an issue for some companies should high-yield rates resume their march higher.
28-May-10	GDP Monitor: May 24 - 28, 2010 We lowered our expectation for real GDP growth in Q2 2010 due to weaker-than-expected shipments of nondefense capital goods excluding aircraft. Currently, we are forecasting a 3.2% increase versus a prior outlook of 3.5%.
28-May-10	Data Detail: Personal Income and Spending - April 2010 Income rose 0.4%, exactly what the median estimate expected and the same growth rate as in March. However, while March's income growth was primarily due growth in government transfers, April saw a 0.4% rise in wages. Steady growth in wages is needed for sustainable consumption.
27-May-10	Trend Watch: May 10-21, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal of identifying emerging trends that have the potential to shape investment decisions.
27-May-10	Data Detail: GDP (Q1-2010), Jobless Claims (May 16 - 22) The second estimate to first quarter GDP was a bit of a disappointment. The revisions showed output increased by only 3.0%, down from 3.2% in the advance estimate and below the median estimate of 3.3%. The main difference between the actual GDP data and the consensus estimate was due to the consensus overestimating the contribution from inventory investment... Excluding the Easter holiday biases, the initial claims level remains stubbornly above its levels in March and shows no signs of labor growth. Yet, this conclusion goes against the gains revealed in April's employment report, where payrolls increased at their fastest pace since 2006.
26-May-10	Data Detail: Durable Orders (Apr-10), Home Sales (Apr-10) In actuality, the durable goods report was extremely negative and paints a very depressing picture of the manufacturing sector. Excluding the transportation sector, durable goods orders declined 1.0%, well below expectations of a 0.7% increase....With the April 30 first-time and existing homebuyers' tax credit deadline approaching, buyers rushed back into the market in April in order to take advantage of the rebates. The resulting surge in buyers drove both existing and new home sales well above consensus expectations.
26-May-10	Market Monitor: Investment Asylum Offered in U.S. It has been a tough period for global markets in the past month. The U.S. has not been exempt from the selling pressure, but with international concerns serving as the tipping point, we have put together a list of companies that derive all of their sales from the U.S. and that could serve as a port in the storm of investment uncertainty.
25-May-10	Data Detail: Consumer Confidence - May 2010 Shockingly, consumer confidence not only beat the median consensus estimate of 58.3 but it also came in higher than the most optimistic economic prediction. This implies the average consumer is more confident about the economy than what any surveyed economist previously believed.
24-May-10	Fix-ated: May 17-21, 2010 Treasury yields ran lower last week as the flight-to-safety trade took hold. However, pushing interest rate risk aside right now could prove to be painful later. Investment-grade corporates continued to perform well, but as spreads get more and more compressed, opportunities are getting scarce. Top-tier companies yielding 3.80% - 3.90% (PEP, IBM, PFE) might look good at +60 to +70 to Treasuries, but we would note that the 10-year Treasury stood at 3.99% a mere six weeks ago. The back-up in high-yield rates may be a buying opportunity.
24-May-10	GDP Monitor: May 17 - 21, 2010 Our expectation for real GDP growth in Q2 2010 was revised higher due to the implementation of a new inventory model. Currently, we are forecasting a 3.5% increase to second quarter GDP versus a prior outlook of 2.3%.
20-May-10	Data Detail: Jobless Claims -- May 9 - 15, 2010 The strengthening of the labor market is a myth, or at least that is what the latest piece of data from the Department of Labor would suggest. The latest jobless claims data revealed the worst initial jobless claims level since the end of January.
19-May-10	Data Detail: Inflation -- April 2010 While many analysts have become focused on the "inevitable" rise in prices as a means to offset the ever increasing deficit, current prices have been moving in the complete opposite direction.
18-May-10	Corporate Bonds -- Earnings Review: 18 May 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include HD, HPQ and WMT. HPQ and WMT look pricey while HD still offers some value on the short end of the curve.
18-May-10	Data Detail: Housing Starts -- April 2010 The housing sector rebound looks to be in full swing as housing starts rose to 672,000, its highest level since October 2008. However, on the flip side, building permits issuances showed a steep decline as only 606,000 permits were authorized, down almost 80,000 from March 2010.
17-May-10	Fix-ated: May 10-14, 2010 Treasuries once again benefited from eurozone concerns and the 30-year auction saw very strong "dollar demand." Investment-grade and high-yield corporate bonds performed well.
14-May-10	GDP Monitor: May 10 - 14, 2010 Our expectation for real GDP growth in Q2 2010 was revised lower due to weaker than expected retail sales data and a change in our medium-term motor vehicle sales forecast. Currently, we are forecasting a 2.3% increase to second quarter GDP versus a prior outlook of 2.9%.
14-May-10	Market Monitor: S&P 100 Exposure to Europe The euro is threatening its October 2008 lows as confidence is lacking in the economic recovery prospects for Europe. We looked at the S&P 100 to see which companies have the least, and the most, exposure to the weakening euro.
14-May-10	Data Detail: Industrial Production -- April 2010 If we take into account that the median estimate factored in a stronger utilities number than what really occurred, then manufacturing production actually came in much stronger than expected.
14-May-10	Data Detail: Retail Sales -- April 2010 The growth in sales was not only a little shaky, but it also seems poised for a downward revision. Unless consumers bought more expensive motor vehicles in April, it seems that the advance retail sales figure overestimated motor vehicle sales growth.
14-May-10	A Look at the Relative Value of Goldman Sachs' 10-year Notes Goldman Sachs' (GS) debt has cheapened substantially since the SEC announced its investigation on April 16th, 2010. While there may be short-term pricing challenges, GS's bonds currently stand out as solid relative value options.
13-May-10	Data Detail: Jobless Benefits -- May 2 - 8, 2010 The data imply that the jobless numbers and nonfarm payrolls are in a sizeable conflict. The payrolls numbers suggest a potential V-shaped recovery whereas the claims data paint the opposite picture.
12-May-10	Trend Watch: April 26 - May 7, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal of identifying emerging trends that have the potential to shape investment decisions.
12-May-10	Data Detail: Trade Balance -- March 2010 The U.S. trade deficit increased from $39.4 bln to $40.4 bln in March. However, the growth in the trade deficit was actually a reassurance that firms expect consumer demand growth to remain strong.
10-May-10	Fix-ated: 3-7 May, 2010 Treasuries rallied on eurozone concerns late last week, but have weakened early today on news of the new-and-improved EU/IMF bailout package. Investment grade corporates and municipals held up well while high-yield bonds saw a fairly large sell-off.
07-May-10	Market Monitor: A Game of Chicken Gone Bad European officials have hemmed and hawed about their willingness to help Greece avoid defaulting on its debt. This week things came to a head in a very nerve-wracking and costly way.
07-May-10	GDP Monitor: May 3 - 7, 2010 Our initial real GDP growth forecast for Q2 2010 is 2.9%, down from 3.2% in the first quarter. The differences between our second quarter forecast and the first quarter actual output are fairly minor with a projected rise in construction spending being the most notable.
07-May-10	Data Detail: Employment Report -- April 2010 In just about every area, April's employment report showcased the strongest labor sector since before the recession.
06-May-10	Data Detail -- Jobless Claims - April 25 - May 1, 2010 For the first three weeks in April, the claims data suffered from statistical biases due to the Easter holiday. As the biases dissipated, both the initial and continuing claims figures remained at March's level.
03-May-10	Dawn of the Super Consumer The strength of the American consumer through the recession has led us to believe we are entering a new era -- the dawn of the "Super Consumer". Like its superhero namesake, this consumer seems impenetrable, invincible and destined to lead us to prosperity.
03-May-10	Data Detail: ISM Index -- April 2010 According to the latest ISM report, the manufacturing sector is not only expanding, but growing at its fastest rate since June 2004.
03-May-10	Data Detail: Construction Spending -- March 2010 The consensus viewpoint was developed under the assumption that February's decline of 1.3% would be unchanged, which turned out to be untrue. Taken together, the change in construction expenditures in February and March were actually worse than expected.
03-May-10	Data Detail: Personal Income and Spending - March 2010 Both personal income and spending met expectations as the consensus was easily able to back-out March's growth numbers from the quarterly GDP aggregates.
03-May-10	Fix-ated: 26-30, April 2010 Treasury auctions went reasonably well last week. Investment grade corporates outperformed high yield during the week.
30-Apr-10	Market Monitor: A Little Off Center... and Further East All eyes have been focused of late on the sovereign debt issues besieging Western Europe. While that is understandable, it would be worthwhile to keep an eye trained on China and the correction taking place in its stock market.
30-Apr-10	GDP Monitor – Reconciliation of the Q1 2010 GDP The advance estimate for Q1 2010 GDP showed output increasing 3.2% q/q annualized. Using all of the available economic data releases, we predicted first quarter growth 1.4 percentage points lower at 1.8%.
30-Apr-10	Data Detail: GDP -- Q1 2010 Advance Estimate While the NBER has not yet officially called the end of the recession, given the continued strength in GDP growth, we feel comfortable stating that it probably ended in the summer of 2009. GDP growth in Q1 2010 represented the third consecutive quarter of positive output gains.
29-Apr-10	Corporate Bonds -- Earnings Review: 29 April 2010 A brief look at some individual debt issues of companies that reported earnings Thursday, how they compare to Treasuries, and how we view their valuations. Today's companies include BG, BMY, CAH, COP, FO, IP, K, MET, MOT, PG and WMI.
29-Apr-10	Institutional Long Equity Allocation Q1 2010 In aggregate, institutional investors are overweight consumer discretionary, health care, technology, and materials in the S&P 1500 and are underweight consumer staples, energy, financials, telecom and utilities.
29-Apr-10	Data Detail: Jobless Claims -- April 18 - 24, 2010 After three weeks in which the initial claims level suffered from statistical biases, we finally get our first true sense of the labor market. Unfortunately, the data suggest that the market is in the same exact position as it was in March.
29-Apr-10	Credit Check: Is a Bottom Near? While we believe the bottoming process for the credit market will take place in H2 2010, it could be at these bottom levels for some time. Unfortunately, we do not expect the next stage of the credit recovery to be a sharp upturn. Instead, we will see much more moderate growth than during the credit boom as consumers continue to deleverage and demand for business loans remains low.
28-Apr-10	Corporate Bonds -- Earnings Review: 28 April 2010 A brief look at some individual debt issues of companies that reported earnings Thursday, how they compare to Treasuries, and how we view their valuations. Today's companies include ALL, DOW, ESRX and WLP.
28-Apr-10	Trend Watch: April 12-23, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal of identifying emerging trends that have the potential to shape investment decisions.
27-Apr-10	Corporate Bonds -- Earnings Review: 27 April 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include DD, F, SWK, UPS, X and VLO.
27-Apr-10	Data Detail: Consumer Confidence -- April 2010 The Conference Board's Consumer Confidence Index climbed another 5.6 points in April to 57.9 and easily exceeded expectations of a rise to 53.5. The index is at its highest point since August 2008, right before the Lehman Bankruptcy.
27-Apr-10	Treasury Auction Preview: 27 April 2010 The U.S. Treasury will sell $44 bln 2-year Notes later today (1:00 p.m. ET). We expect solid demand as the safety trade is alive and well on eurozone issues.
26-Apr-10	Corporate Bonds -- Earnings Review: 26 April 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include CAT and WHR.
26-Apr-10	Treasury Auction Preview: 26 April 2010 The Treasury will kick off a series of longer maturity auctions when it sells $11 bln 5-year TIPS later today (1:00 p.m. ET).
26-Apr-10	Fix-ated: 19-23 April, 2010 Treasuries ended the week fairly flat after rallying on concerns over Greece. High-yield corporates continued to perform well. The Treasury's auctions and corporate earnings will be the focus this week.
26-Apr-10	Market Monitor: Q1 Earnings Reporting Snapshot With roughly one-third of the S&P 500 having reported first quarter earnings, it is clear that the earnings recovery is for real and that it is broad-based. More importantly, it is shifting from a cost-cutting recovery to a demand-driven one.
23-Apr-10	GDP Monitor: April 19 - 23, 2010 Our expectation for real GDP growth in Q1 2010 went up this week due to much stronger equipment and software investment and a revision to our IVA estimate. Currently, we are forecasting a 1.8% increase to first quarter GDP versus a prior outlook of 1.1%.
23-Apr-10	Data Detail: Home Sales -- March 2010 The mood for home sales drastically changed in March as buyers rushed into the marketplace in order to take advantage of the first-time and existing homebuyers' tax breaks before they expire at the end of April.
23-Apr-10	Data Detail: Durable Goods Orders -- March 2010 The entire decline in total orders can be attributed to a shift in aircraft demand as nondefense aircraft orders fell 67.1%. In January and February, these orders increased 212%. A drop to a more normal orders figure was inevitable.
22-Apr-10	Corporate Bonds -- Earnings Review: 22 April 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include AXP, BAX, HSY, MAR, PEP, PM and VZ.
22-Apr-10	Data Detail: Inflation -- March 2010 Inflation hawks were disappointed by March's inflation data. We continue to expect limited pass-through from the PPI to the CPI. As a result, there will be pressure on profit margins.
22-Apr-10	Sovereign Debt Update: Weak Deficit Data from Greece/Ireland Eurostat, the European Union's statistics office, released official 2009 budget data this morning. For two countries in particular -- Greece and Ireland -- the results were worse than expected.
22-Apr-10	Data Detail: Initial Claims -- April 11 - 17, 2010 The volatility in claims experienced over the past few weeks is not a clear representation of the labor sector. Given the strength in the ISM and consumer surveys, we anticipate the initial claims level to fall below the March 27 low in next week's data release.
21-Apr-10	Corporate Bonds -- Earnings Review: 21 April 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include ABT, MO, AMGN, T, BA, MS, SBUX and UTX.
20-Apr-10	Corporate Bonds -- Earnings Review: 20 April 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include GS, JNJ, KO and UNH.
19-Apr-10	Corporate Bonds -- Earnings Review: 19 April 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include C, HAL, IBM and LLY.
19-Apr-10	Market Monitor: Near to "Normal" At last week's high, the S&P 500 was just 3% shy of where it closed the last business day before Lehman Bros. declared bankruptcy in September 2008. In other words, it was on the threshold of being back to "normal."
19-Apr-10	Fix-ated: April 12-16, 2010 Treasuries benefited from the safety trade late last week on news from Goldman Sachs (GS) and Greece. Corporate bonds continued to perform well across the board.
16-Apr-10	GDP Monitor: April 12 - 16, 2010 Our expectation for real GDP growth in Q1 2010 moved sharply lower this week due to a much weaker trade balance. Currently, we are forecasting a 1.1% increase versus a prior outlook of 2.9%.
16-Apr-10	Data Detail: Housing Starts -- March 2010 The data suggest that the rise in starts is not due to some unknown volatility, but is the start of a steady trend upward. While the steepness of the upward movement is still under investigation, we are confident that starts will remain on this path for at least the next few months.
16-Apr-10	General Electric -- Less is More GE produced strong results in the first quarter, underscoring a company that has turned the corner. The outlook continues to improve, underscored by order trends and loss rates in GE Capital Services.
16-Apr-10	Credit Card Trust Data -- March 2010 While net charge-off rates came in mixed for the month, delinquencies declined, allowing us to reiterate our expectation that charge-offs will peak over the next couple of months. Although early-stage delinquencies came in mixed, roll rates improved.
15-Apr-10	Swap Spreads Turn Negative: Oddity or Foreshadowing Turmoil It is very possible that a negative spread is just a technical oddity that will have a relatively benign effect on the economy. Or, like an inverted yield curve, the spread could foreshadow malevolent things to come.
15-Apr-10	Data Detail: Industrial Production -- March 2010 Given the extensive manufacturing production increase, the industrial production report actually showcased one of the best monthly output gains since the recovery began.
15-Apr-10	Data Detail: Initial Claims -- April 4 - 10, 2010 For the second week in a row, the initial claims data were hindered by biases in the seasonal adjustment factors following the Easter holiday. The Department of Labor expects the adjustments will remain a problem for at least another week.
14-Apr-10	Trend Watch: March 29 - April 9, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal to identify emerging trends that have the potential to shape investment decisions.
14-Apr-10	Data Detail: Retail Sales -- March 2010 Retail sales saw its third consecutive month of increased sales growth and signal consumption growth should be a strong contributor to first quarter GDP.
14-Apr-10	JPMorgan -- A Strong Start JPMorgan Chase (JPM) kicked off the financial sector's first quarter earnings season on a strong note this morning. Credit moderated and the bank generated pre-provision earnings of $12.08 bln on a managed basis. The negative: $2.3 bln in litigation expense provisions and higher card charge offs.
13-Apr-10	Sovereign Debt: A Financial and Historical Framework The beginning of this century will be marred by the Great Credit Crisis and its aftermath. The historical precedent of default clusters has only started to reveal itself. That precedent has typically involved developing and emerging nations. This time is different.
13-Apr-10	Data Detail: Trade Balance -- February 2010 While the latest U.S. trade data will end up lowering our first quarter GDP estimate, the details regarding the widening of the trade balance suggest a more sturdy economic recovery.
12-Apr-10	Fix-ated: April 5-9, 2010 Treasuries regained lost ground on the back of three solid auctions, high-yield corporates rallied and munis showed some weakness heading towards April 15th.
12-Apr-10	Market Monitor: A Dividend Divide Dividend payers have a time-tested history of boosting portfolio returns, but occasionally that history takes a backseat to the appeal of price appreciation. This is one of those periods.
09-Apr-10	GDP Monitor: April 5 - 9, 2010 Our expectation for real GDP growth in Q1 2010 was revised up this week due to better-than-expected wholesale inventories. Currently, we are forecasting a 2.9% increase to first quarter GDP versus a prior outlook of 2.4%.
08-Apr-10	Gaming Win: February 2010 -- Nevada, Strip Soar Win on the Las Vegas Strip has shown a year-over-year increase for four consecutive months when using the combined data for January and February. Nevada's dollar figure for February of $946.6 mln is also 18.3% above the October 2009 low of $800.3 mln. That may show that consumers are increasing their spending on discretionary items for the first time since the recession began.
08-Apr-10	Data Detail: Initial Claims -- March 28 - April 3, 2010 The uptick in claims should not be a source of worry and instead is the result of statistical complications. Since Easter is a moving holiday, the typical seasonal adjustment factors often fail and cause discrepancies in the reported numbers.
05-Apr-10	Market Monitor: Outlook The return to normalcy for the stock market and the economy will be a vision quest as the year continues to unfold. That discovery process should mean good things in the near term, yet there are major issues to deal with when looking further out.
05-Apr-10	Data Detail: Motor Vehicle Sales -- March 2010 After a lackluster February, in which dealers blamed the weather for their poor sales results, manufacturers laid out heavy incentives in order to increase sales traction in March. As a direct result, sales rose to a post-Cash for Clunkers high in March.
05-Apr-10	Fix-ated: March 29 - April 2, 2010 Treasuries were off slightly last week and face an uphill battle this week in the face of looming supply. Municipals were slightly weaker -- again on very little issuance. This week's calendar looks to be light as well.
05-Apr-10	Are Treasuries at a Tipping Point? "Dollar demand" has been a favorite measurement of ours recently -- and that is what has us a bit concerned right now. Although the numbers from two weeks ago were still strong relative to the first half of the 12-auction cycle, it is notable that all three auctions were significantly below the recent trend. For now, we would say Treasuries are a "buyer beware" proposition.
02-Apr-10	Data Detail: Employment Report - March 2010 The headline number for March nonfarm payrolls came up just shy of the consensus estimate. Looking into the details, though, the March number was actually better than expected.
01-Apr-10	GDP Monitor: March 26 - April 1, 2010 Our expectation for real GDP growth in Q1 2010 was revised down this week due to a contraction in construction spending.� Currently, we are forecasting a 2.4% increase to first quarter GDP versus a prior outlook of 2.6%.
01-Apr-10	Data Detail: ISM Index -- March 2010 The strength was evident in the ISM subcomponents, where each registered an improvement over February's level except for order backlogs and employment. However, those declines were not enough to start a new contraction cycle.
01-Apr-10	Data Detail: Construction Spending -- February 2010 At the time of the housing starts release, many analysts attributed the decline to inclement weather conditions preventing builders from working. However, if weather made construction difficult, the decline in nonresidential construction should have been much worse.
01-Apr-10	Data Detail: Initial Claims -- March 21 - 27, 2010 The lack of movement in continuing claims suggests that every person whose unemployment benefits end is immediately refilled by a new claimant. Further, the small decline in claims is most likely due to the expiration of benefits and not job formation.
31-Mar-10	Data Detail: Factory Orders -- February 2010 Orders would not have beaten expectations if not for an upward revision to durable goods. The revisions were spread throughout the data and show stronger growth across all sectors.
30-Mar-10	Trend Watch: March 15-27, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal to identify emerging trends that have the potential to shape investment decisions.
30-Mar-10	Data Detail: Consumer Confidence - March 2010 Typically,�an extreme rise in gasoline prices would have canceled out the positive contributions from the other relationships, but consumers were much more impressed with the wealth effects from higher equity prices than the lost income from increased gasoline spending.
30-Mar-10	Data Detail: Case-Shiller Home Price Index - January 2010 Home prices, as determined by the Case-Shiller index, have performed admirably over the past few months even though housing sales have plummeted.
29-Mar-10	Data Detail: Personal Consumption -- February 2010 The details of the spending report matched up perfectly with February's retail sales report excluding the motor vehicles data.Nondurable goods consumption rose 0.7% in both the spending and retail sales reports while durable goods demand increased 1.1% in both reports.
29-Mar-10	Market Monitor: Back to the Future With the first quarter drawing to an end, we will soon be providing an update to our Market Outlook. First, though, we look back as part of the process of looking forward.
29-Mar-10	Fix-ated: March 22-26, 2010 Treasuries yields rose sharply last week as all three major auctions failed to impress the market. Municipals also made their first major move to the downside since early February while corporates displayed relative strength.
26-Mar-10	GDP Monitor: March 22-26, 2010 Our expectation for real GDP growth in Q1 2010 was revised up this week due to durable goods shipments. Currently, we are forecasting a 2.6% increase to first quarter GDP versus a prior outlook of 2.4%.
26-Mar-10	Data Detail: GDP -- Q4 2009 - Third Estimate The fourth quarter GDP growth rate was revised down from 5.9% to 5.6% in the third estimate. All GDP sectors faced downward revisions, but the only material revisions were found in the investment sector.
25-Mar-10	Treasury Auction Preview: 25 March 2010 The Treasury will wrap up its major auctions for the week later today when it sells $32 bln 7-year Notes. Demand has been tepid so far this week and we think it is likely that trend will continue today.
25-Mar-10	Data Detail: Initial Claims - March 14-20, 2010 It seems firms are finally satisfied with their labor needs and future layoffs will be due to individual firm-specific difficulties and not by sector-wide problems.
24-Mar-10	Data Detail: New Home Sales -- February 2010 While the housing market is clearly going through a payback period following the original November expiration date for the first-time homebuyers' tax credit, it seems to be abating.
24-Mar-10	Treasury Auction Preview: 24 March 2010 The Treasury will hold the second of its major auctions later today when it sells $42 bln 5-year Notes. Supply concerns may keep demand lighter than the market would prefer to see.
24-Mar-10	Data Detail: Durable Goods Orders -- February 2010 Business investment (nondefense capital goods excluding aircraft), which looked extremely weak in January, posted a nice 1.1% rebound in February. However, capacity utilization rates are still well below levels that foster investment growth.
23-Mar-10	Data Detail: Existing Home Sales -- February 2010 The data are actually encouraging for the housing sector. The lack of a further leg down in sales may signal that potential homebuyers are gearing up toward making new purchases before the�tax breaks expire at the end of April.
22-Mar-10	Fix-ated: March 15-19, 2010 Treasuries remained strong last week as eurozone concerns continued to fester. Corporate issuance was strong and both high-yield and investment-grade bonds recorded gains.
22-Mar-10	Market Monitor: Flashing Yellow The stock market has run hard in recent weeks and, while it is prudent to proceed with caution for the time being, changes in investor sentiment make us think any near-term pullbacks will stop short of a 10% correction, barring an exogenous shock.
19-Mar-10	GDP Monitor: March 15-19, 2010 Our expectation for real GDP growth in Q1 2010 was revised up this week due to stronger inventory estimates. Currently, we are forecasting a 2.4% increase to first quarter GDP versus a prior outlook of 1.7%.
18-Mar-10	Corporate Bonds -- Earnings Review: 18 March 2010 A brief look at some individual debt issues of companies that reported earnings today, how they compare to Treasuries, and how we view their valuations. Today's companies include FDX and NKE.
18-Mar-10	FedEx: Upside Results Not Enough to Offset Other Issues Despite beating on the top and bottom lines, shares of FedEx fell by more than 3% immediately following the company's third quarter earnings release. Though they have rebounded, the selling pressure underscores the heightened level of expectations that were being priced into the stock.
18-Mar-10	Data Detail: CPI -- February 2010 As with yesterday's PPI data, the notion of runaway inflation continues to ease with each passing inflation report. The CPI data suggest only minor inflationary pressures.
18-Mar-10	Data Detail: Initial Claims -- March 7 - 13, 2010 The limited movement in claims over the past three weeks suggests that the labor market has hit a new equilibrium plateau. It could take a few more weeks before it breaks out again in a steep downward trajectory.
17-Mar-10	Data Detail: PPI -- February 2010 The preponderance of inflation hawks in the media would suggest that inflation is on the verge of getting out of hand. However, the PPI has shown no clear signs of sustained strong inflation.
16-Mar-10	FOMC Follows Form There were not any real surprises in the latest directive from the Federal Open Market Committee. Notably, the market was essentially promised that it will have access to ultra-low rates until at least the April 28 FOMC meeting.
16-Mar-10	Data Detail: Housing Starts -- February 2010 The decline in starts from 611,000 to 575,000 seems to be normal volatility in the index and not the start of a downturn in construction. The lack of a downward movement makes us wonder if homebuilders believe the stimulus plans will be extended beyond June.
15-Mar-10	Credit Card Trust Data -- February 2010 Credit card issuers and banks saw their net charge-off rates increase by a higher than expected amount in February, though delinquencies held steady. Despite today's bearish data, we continue to believe charge-offs will peak over the next few months.
15-Mar-10	Data Detail: Industrial Production -- February 2010 The only reason why production showed positive growth over the month was due to an unexpectedly strong increase in mining production, which increased 2.0% in February after rising 1.1% in January.
15-Mar-10	Market Monitor: Still Climbing a Wall of Worry The stock market does not have a shortage of things to worry about, yet that did not stop the S&P 500 from hitting a new 52-week high last week on signs of increasing participation from the retail investor.
15-Mar-10	Fix-ated: March 8-12, 2010 Last week, all three major Treasury auctions were greeted with heavy demand, corporate issuance rose significantly, and two of the most headline-battered municipal credits saw market acceptance.
12-Mar-10	GDP Monitor: March 8-12, 2010 Our expectation for real GDP growth in Q1 2010 was revised up this week due to much stronger-than-expected consumption growth. Currently, we are forecasting a 1.7% increase to first quarter GDP versus a prior outlook of 1.3%.
12-Mar-10	Data Detail: Business Inventories -- January 2010 The lack of sustainable inventory growth over the last two months should not necessarily lower 2010 GDP forecasts. Inventories move in cycles and growth should return in the next few months as consumer demand stabilizes.
12-Mar-10	Data Detail: Retail Sales -- February 2010 This is the third piece of data, after the previously released initial claims figure and employment situation report, to verify that the inclement winter weather in February had no lasting effect on economic growth during the month.
11-Mar-10	Data Detail: Trade Balance -- January 2010 The biggest difference between the consensus estimate and the actual data came in the petroleum import sector. January's consumption data showed a surge in gasoline expenditures. However, petroleum imports declined $0.878 bln.
11-Mar-10	Data Detail: Initial Claims -- Feb. 28 - March 6, 2010 Since claims held between 460,000 and 470,000 over the last couple of weeks without any external disturbances to the data, it is plausible that this bound is the new equilibrium point.
10-Mar-10	Las Vegas Strip Revenue Declines 3% in January Nevada's Gaming Control Board released Gaming Win (revenue) figures for the month of January this morning, and the results were modestly weaker than expected. Despite the miss, casino stocks have trended higher throughout the morning.
10-Mar-10	Treasury Auction Preview: 10 March 2010 The Treasury will hold the second of its major auctions later today when it sells $21 bln in 10-year Notes. Today's weakness in the market should help to bolster demand.
09-Mar-10	Treasury Auction Preview: 09 March 2010 The Treasury will kickoff its major auctions for the week with $40 bln of 3-year Notes later today (1:00 p.m. ET). We expect the solid demand trend to continue.
08-Mar-10	Fix-ated: March 1-5, 2010 U.S. Treasuries fell last week as the employment report came in better than expected. Corporate bonds were mixed as high-yield bonds rallied significantly and investment-grade bonds showed some weakness.
08-Mar-10	Market Monitor: A Beatles Tribute We are on the cusp of another 10-year milestone that is sure to have snuck up on a lot of market participants given all that has happened in the last decade. The milestone is the 10-year anniversary of the Nasdaq Composite hitting its all-time high of 5132.52 on March 10, 2000. Today it sits at 2326.35.
05-Mar-10	GDP Monitor -- Mar. 1-5, 2010 Our expectation for real GDP growth in Q1 2010 was revised up this week due to the revisions to January's personal consumption data. Currently, we are forecasting a 1.3% increase to first quarter GDP versus a prior outlook of 0.7%.
05-Mar-10	Corporate Bonds -- Earnings Review: March 1-5, 2010 A brief look at some individual debt issues of companies that reported earnings this week, how they compare to Treasuries, and how we view their valuations. This week's companies include DISH, AZO and SPLS. DISH stands out as a possible good play for managers who want to stay on the shorter end of the curve.
05-Mar-10	Data Detail: Employment Report -- February 2010 It seems forecasters, including us, overestimated the effects of the severe winter weather on the payrolls data. The consensus estimate included a decline of 100,000 in payrolls due to inclement weather. The estimate turned out to be bogus and weather conditions played almost no role in moving the payroll numbers.
05-Mar-10	Institutional Equity Allocation Q4 2009 Institutional investors continued to be overweight cyclical sectors and underweight defensive sectors, with the exception of healthcare and energy. Hedge funds increased bets on wireless telecom, airlines, and office electronics.
04-Mar-10	Data Detail: Factory Orders -- January 2010 The factory orders report gives a very poor initial reading to business investment in the first quarter. Given the economic backdrop, the decline in investment expenditures in January leads us to believe that businesses are not so sure about the recovery.
04-Mar-10	Data Detail: Productivity -- Q4 2009 - Revised Productivity increased in the fourth quarter because workers were able to boost output back to Q4 2008 levels, while using a workforce on par with Q2 1996 levels.
04-Mar-10	Data Detail: Initial Claims -- Feb. 21-27, 2010 We expected a backlog of applications following the inclement weather conditions in the early part of February to push claims even higher. The drop in claims suggests that inclement weather may not have had nearly as much effect on the labor data as initially expected.
03-Mar-10	Data Detail: Motor Vehicle Sales -- February 2010 Many analysts attributed the decline in sales to poor weather conditions. Massive snowstorms across the U.S. in February resulted in many consumers being holed up in their homes and unable to purchase a new car. It is expected that sales will resume an upward pace in March.
01-Mar-10	Data Detail: Construction Spending -- January 2010 Total construction expenditures declined 0.6% in January, exactly in-line with the consensus expectation. The diversity of declines in nonresidential construction confirms our belief that investment in nonresidential structures still has a long way to go before bottoming out.
01-Mar-10	Data Detail: ISM Index -- February 2010 Growth in the manufacturing sector slowed according to the latest ISM report. The ISM index fell from 58.4 in January to 56.5 in February. Inventories look to be on the cusp of breaking through the 50 threshold for the first time since April 2006.
01-Mar-10	Data Detail: Personal Income and Spending -- January 2010 January's personal spending and income release came in very mixed. On a high note, personal spending outperformed the consensus expectation by 0.1 percentage points with growth of 0.5%. On the downside, personal income increased only 0.1%, which was 0.3 percentage points less than the consensus forecast.
01-Mar-10	Market Monitor: Something Big or Nothing at All The U.S. stock market has been confined to a narrow trading range that is breeding apathy in traders. The low trading volume speaks to a market that is looking around the corner, unsure of what it will see there.
01-Mar-10	Fix-ated: Feb. 22-26, 2010 U.S. Treasuries rallied last week as the safety trade took center stage in light of the ongoing concerns in the eurozone and less-than-stellar economic data. The U.S. government once again benefited from the woes of others as all three of its auctions were well received. Corporate bonds were mixed as investment-grade bonds outdid high-yield bonds.
26-Feb-10	GDP Monitor: Feb. 22-26, 2010 Our expectation for real GDP growth in Q1 2010 was revised down this week due to the revisions to the Q4 2009 figure. Currently, we are forecasting a 0.7% increase to first quarter GDP versus a prior outlook of 1.0%.
26-Feb-10	A Check-up on China A number of noteworthy stories out of China circulated Friday morning. They show that the country is continuing with its policy tightening steps, as expected. However, they must be taken with a grain of salt.
26-Feb-10	Data Detail: Existing Home Sales -- January 2010 Existing home sales declined from 5.440 mln homes to 5.050 mln homes in January. We expect that it will take a few months before the supply of potential homebuyers swells enough to support stronger sales.
26-Feb-10	Data Detail: GDP -- Q4 2009 Second Estimate Real GDP for Q4 2009 was revised up from 5.7% to 5.9% in the second estimate. Even though the total revision was small in magnitude, it was fairly volatile across all sectors.
25-Feb-10	Data Detail: Durable Goods Orders -- January 2010 Durable goods orders rose 3.0% in January, but the figure is misleading as transportation orders jumped 15.6% on the back of a 126% increase in orders for nondefense aircraft. In addition, growth in business investment seems to have slowed as orders for nondefense capital goods excluding aircraft fell 2.9% after increasing roughly 3.3% in both November and December.
25-Feb-10	Treasury Auction Preview: 25 February 2010 The Treasury hopes to cap off a week of solid sales with today's $32 bln 7-year Note auction (1:00 p.m. ET). The 7-year has established a solid demand trend over the past several months and we see no reason for that to stop now given that the flight-to-safety trade is back on in full force.
25-Feb-10	Data Detail: Initial Claims -- Feb. 14-20, 2010 The initial claims data for the week ending Feb. 20 showed that the figure increased from 474,000 to 496,000. The consensus expected initial claims to decline to 460,000. Given that inclement weather in many cities may have prevented workers from filing new claims, it is possible the actual claims figure could be closer to 550,000.
24-Feb-10	Corporate Bonds -- Earnings Review: 24 February 2010 A brief look at some individual debt issues of companies that report earnings Wednesday, how they compare to Treasuries, and how we view their valuations. Today's companies include ESRX, RIG and TJX. ESRX's 5-year Note stands out as the most interesting.
24-Feb-10	Data Detail: New Home Sales -- January 2010 New home sales continued to fall in January as sales slumped to 309,000 from 348,000 in December. The consensus expected sales to increase to 354,000. Sales will probably remain low for at least one more month as the supply of new homebuyers takes time to restock.
24-Feb-10	Treasury Auction Preview: 24 February 2010 Today's $42 bln 5-year Note auction (1:00 p.m. ET) should find solid support in light of a strong 2-year Note auction Tuesday and economic data that continues to bring the strength and quickness of the recovery into question.
24-Feb-10	Data Detail: Case-Shiller Home Price Index -- December 2009 The S&P/Case-Shiller 20-city Home Price Index fell only 3.08% y/y in December after declining 5.34% in November. The index posted its seventh consecutive monthly gain after bottoming in June 2009.
23-Feb-10	Corporate Bonds -- Earnings Review: 23 February 2010 A brief look at some individual debt issues of companies that reported earnings Tuesday, how they compare to Treasuries, and how we view their valuations. Today's companies include HD, M and TGT. HD continues to be worth considering on a relative-value basis.
23-Feb-10	Data Detail: Consumer Confidence -- February 2010 The Conference Board's Consumer Confidence Index declined from 56.5 in January to 46.0 in February. The consensus expected a much more modest drop to 55.0. The drop in the index comes in the face of falling unemployment, lower gasoline prices, and more positive news about the economy in the media.
23-Feb-10	Treasury Auction Preview: 23 February 2010 Today's $44 bln 2-year Note auction (1:00 p.m. ET) should find decent support in light of today's less-than-inspiring economic data. Fairly robust "dollar demand" should lead to a reasonably strong bid-to-cover.
23-Feb-10	Trend Watch: Feb. 8-19, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal to identify emerging trends that have the potential to shape investment decisions.
22-Feb-10	Schlumberger and Smith Intl -- A Strategic and Natural Fit The merger of Schlumberger (SLB) and Smith International (SII) yields one dominant player in two of the premier development segments over the next decade -- shale gas and deepwater.
22-Feb-10	Corporate Bonds -- Earnings Review: 22 February 2010 A brief look at some individual debt issues of companies that report earnings on Monday, how they compare to Treasuries, and how we view their valuations. Today's companies include CPB, LOW and JWN. While we think LOW is still a reasonable option, we feel there may be better alternatives to CPB and JWN -- especially in the 10-year range.
22-Feb-10	Market Monitor: Signs of Uncertainty The U.S. stock market has come back to life in recent weeks, gaining as much as 6.5% from its intraday low on Feb. 5. Despite that rebound effort, there are clear signs the market continues to hedge its bets on the outlook.
22-Feb-10	Fix-ated: Feb. 16-19, 2010 U.S Treasuries retreated toward their highest yields of the year last week. The safety trade seems to be weakening as the market starts to once again weigh the likelihood of interest rate increases and yet another week of heavy supply. Corporate bonds were mixed as high-yield debt rallied from its sell-off the week before.
19-Feb-10	GDP Monitor: Feb. 15-19, 2010 Our forecast for real GDP for Q1 2010 was revised down this week due to stronger-than-expected inflation data. Currently, we are forecasting a 1.0% increase to first quarter GDP versus a prior outlook of 3.0%.
19-Feb-10	Data Detail: CPI -- January 2010 To no one's surprise, the energy index, which was up 2.8%, led the 0.2% increase in January CPI. Overall, the headlines for CPI fall to the pleasing side with respect to the inflation outlook.
18-Feb-10	Data Detail: Producer Price Index -- January 2010 The PPI jumped 1.4% in January vs. a consensus estimate of 0.8%. While the difference between the consensus estimate and the reported number looks significant, the miss was actually due to changes in the makeup of the PPI index.
18-Feb-10	Data Detail: Initial Claims -- Feb. 7-13, 2010 Initial claims for the week ending Feb. 13 climbed to 473,000. The figure represents a significant weakening in the labor market as job creation appears to be at an absolute standstill.
17-Feb-10	Corporate Bonds -- Earnings Review: 17 February 2010 A brief look at some individual debt issues of companies that reported earnings Wednesday, how they compare to Treasuries, and how we view their valuations. Today's companies include DE and HPQ. While we think each of their shorter-maturity bonds are reasonable plays, we do point out some options for managers to consider.
17-Feb-10	Data Detail: Industrial Production -- January 2010 The details of the January Industrial Production report, which showed that production grew 0.9%, are encouraging since the manufacturing sector provided the bulk of the increase.
17-Feb-10	Economic Monthly -- Strong Indications for a Weak 2010 While it looks like 2010 will start off strong as GDP grows at its potential rate in the first and second quarter, growth in the second half will hinge on how the economy reacts without direct fiscal and monetary stimulus. The housing market will be the biggest question mark.
17-Feb-10	Data Detail: Housing Starts -- January 2010 Housing starts exceeded expectations in January. Even more impressive was that December's numbers were revised higher. January's data, along with December's revisions, suggest builders believe demand will remain stable.
16-Feb-10	Market Monitor: Cloudy with a Chance of Earnings Revisions The fourth quarter earnings results continue to be filled with positive surprises. The problem for the stock market is that unfolding macro events are creating questions as to whether growth estimates for calendar 2010 are achievable.
16-Feb-10	Credit Card Trust Data -- January 2010 The trust data for January came in modestly better than expected, but overall strength in the market due to a weaker U.S. dollar played a larger role in helping credit card issuers and bank stocks advance today.
16-Feb-10	Chinese Government at a Crossroads in 2010 More policy changes from China will come out of the National People's Congress meeting in March. Those changes remain to be seen. What we do know is that interest rates will be going up sooner rather than later.
16-Feb-10	Fix-ated: Feb. 8-12, 2010 U.S Treasuries survived another week of heavy issuance as eurozone concerns continued to support the safety trade. While the market's response to the auction results was less than enthusiastic, each sale did have solid "dollar demand." Corporate and municipal issuance were each muted, but there were still some large individual issues that were well received by the market. High-yield bonds continue to weaken as indicated by the fact that the ML HY index reached a level not seen since mid-December 2009.
16-Feb-10	Corporate Bonds -- Earnings Review: 16 February 2010 A brief look at some individual debt issues of companies that reported earnings Tuesday, how they compare to Treasuries, and how we view their valuations. Today's companies include KFT and MRK. We continue to believe that KFT has some upside in it.
12-Feb-10	GDP Monitor -- Feb. 8-12, 2010 Our real GDP forecast for Q1 2010 was revised up this week due to stronger-than-expected retail sales. Currently, we are forecasting a 3.3% increase to first quarter GDP versus a prior outlook of 2.7%.
12-Feb-10	Data Detail: Retail Sales -- January 2010 Retail sales exceeded expectations in January, rising 0.5% vs. consensus of 0.3%. The report was extremely strong across all sectors. Importantly, core retail sales rose 0.8% in January after declining 0.3% in December. The growth gives hope that consumption growth may be on a more stable path.
12-Feb-10	Data Detail: Business Inventories -- December 2009 The consensus disregarded the latest BEA inventories estimate found in the Q4 2009 GDP report. Given that the BEA's estimates for manufacturer and merchant wholesaler inventories were spot on, it made no sense to believe that retailer inventory growth would have exceeded the BEA's estimate by 1.3 percentage points.
11-Feb-10	Corporate Bonds -- Earnings Review: 11 February 2010 A brief look at some individual debt issues of companies that reported earnings Thrusday, how they compare to Treasuries, and how we view their valuations. Today's companies include MAR, PEP and PM. MAR still has some value left in it even after its recent run.
11-Feb-10	Las Vegas Strip Gaming Revenue Increases 5.9% in December It is unclear what affect the opening of Aria, CityCenter's resort and casino, had on December's data. It is possible gamblers tried their luck there at the expense of the casinos in the locals market and downtown.
11-Feb-10	Treasury Auction Preview: 11 February 2010 Today's $16 bln 30-year Note auction (1:00 p.m. ET) should find decent support given the recent back-up in yields. The bid-to-cover might disappoint the market if the auction fails to attract less than $39 bln in "dollar demand" -- the amount needed to reach the 11-auction average of 2.44. That would be the highest "dollar demand" since we started tracking the figure in January 2009.
11-Feb-10	Data Detail: Initial Claims -- Jan. 31-Feb. 6, 2010 The initial claims figure for the week ending Feb. 6 declined by 43,000 to 440,000. With the conclusion of the adminstrative backlog, the Department of Labor said the improvement in claims did not reflect a strengthening of the labor sector, but simply a removal of an external bias from the data. This week's data, which now accurately reflects current economic conditions, was impacted by inclement weather, which may have prohibited some claims from being filed.
10-Feb-10	Treasury Auction Review: 10 February 2010 Today's $25 bln 10-year Note auction disappointed the market with regard to its bid-to-cover. However, "dollar demand" was still fairly significant.
10-Feb-10	Treasury Auction Preview: 10 February 2010 Today's $25 bln 10-year Note auction (1:00 p.m. ET) may have a disappointing bid-to-cover if the "dollar demand" does not significantly exceed recent levels.
10-Feb-10	Data Detail: Trade Balance -- December 2009 The trade deficit increased from $36.4 bln in November to $40.2 bln in December, primarily caused by a jump in petroleum imports. The BEA accurately forecasted the figures which means that Q4 2009 GDP will be unaffected.
09-Feb-10	Corporate Bonds -- Earnings Review: 09 February 2010 A brief look at some individual debt issues of companies that report earnings Tuesday, how they compare to Treasuries, and how we view their valuations. Today's companies include DIS and KO. Both appear to be fully valued.
09-Feb-10	Treasury Auction Preview: 09 February 2010 Today's $40 bln 3-year Note auction (1:00 p.m. ET) will likely see heavy "dollar demand."
08-Feb-10	Market Monitor: Caution Is Better Part of Valor With the stock market declining as much as 9.2% from its January high, conditions are ripening for a short-term bounce. With shifting market dynamics, though, selection will be key in a rebound trade.
08-Feb-10	Fix-ated: Feb. 1-5, 2010 The U.S. Treasury market solidified its safe-haven position as professional investors drove yields down while fleeing from riskier assets including sovereign debt and global equities. While options are becoming more limited, we believe that there are still select relative-value plays in corporate and taxable municipal bonds.
05-Feb-10	GDP Monitor -- Reconciliation of Q4 2009 GDP, Part 2 As we mentioned in last week's GDP monitor, we overestimated the change in inventories growth. We expected inventories to increase by $12 bln whereas the actual data showed a drop of $33.5 bln. The Bureau of Economic Analysis (BEA) released its detailed inventory estimates on Monday, Feb. 1. These details gave a better indication of where our forecast differed from the actual data.
05-Feb-10	Data Detail: Employment Report -- January 2010 Nonfarm payrolls declined by 20,000 jobs in January after shedding a revised 150,000 jobs in December. The consensus expected gains of 15,000. At the same time, the unemployment rate fell 0.3 percentage points to 9.7%, its lowest level since August 2009. The discrepancy between the payroll and unemployment data is difficult to discern. Statistical anomalies cannot explain the drop in unemployment.
04-Feb-10	Visa, Mastercard on Different Sides Last Quarter Despite the differences between the two peers, there are two positive takeaways for the industry. First, the secular shift away from cash and check to credit and debit continues. Second, each company's volume metrics, which bottomed March of 2009, continued to improve last quarter, with some returning to double-digit growth for the first time since the September quarter of 2008.
04-Feb-10	Corporate Bonds -- Earnings Review: 04 February 2010 A brief look at some individual debt issues of companies that reported earnings Thursday, how they compare to Treasuries, and how we view their valuations. Today's companies include AVP, BG, CI, CLX and K. BG stands apart from the pack.
04-Feb-10	Data Detail: Factory Orders -- December 2009 Factory orders data surprised on the upside as orders grew 1.0% in December. The consensus estimate called for orders to increase 0.5%. The data benefited from heavy upward revisions to the advance durable goods orders numbers.
04-Feb-10	Data Detail: Nonfarm Productivity -- Q4 2009 While the third quarter increase in productivity was mostly due to a drop in the number of hours, fourth quarter growth saw strength in both output (7.2%) and hours (1.0%).
04-Feb-10	Data Detail: Initial Claims -- Jan. 24-30, 2010 For the past few weeks, it was assumed that a backlog in processing applications led to higher initial claims figures. Now, three weeks later, it seems very likely that the weakness in initial claims is due to poor economic conditions.
03-Feb-10	Corporate Bonds -- Earnings Review: 03 February 2010 A brief look at some individual debt issues of companies that reported earnings Wednesday, how they compare to Treasuries, and how we view their valuations. Today's companies include BDK, CSCO, CMCSA, IP, PFE, and YUM. YUM and BDK may have had their runs.
03-Feb-10	Data Detail: ADP National Employment Report -- January 2010 Nonfarm payrolls, as estimated by the ADP National Employment Report, are expected to decline by 22,000 in January. The consensus predicted the ADP employment report would show a payroll decline of 30,000.
03-Feb-10	Data Detail: Vehicle Sales -- January 2010 Total vehicle sales fell to their lowest seasonally adjusted level since October 2009 as only 10.80 mln vehicles were sold in January. Seasonally adjusted domestic sales were weak, a bit of a surprise considering the well-publicized Toyota recall.
02-Feb-10	Corporate Bonds -- Earnings Review: 02 February 2010 A brief look at some individual debt issues of companies that reported earnings Friday, how they compare to Treasuries, and how we view their valuations. Today's companies include ADM, DOW, HSY, PBG, UPS, and WHR. HSY and others look compelling while UPS looks full.
01-Feb-10	Data Detail: Construction Spending -- December 2009 Construction spending fell 1.2% in December after declining a downwardly revised 1.2% in November. The consensus expected construction spending to fall 0.5%.
01-Feb-10	Data Detail: Personal Income and Spending -- December 2009 Personal consumption expenditures increased 0.2% in December after increasing 0.7% in November. The consensus estimate called for consumption to increase 0.3%.
01-Feb-10	Market Monitor: A Dynamic Shift The stock market has been unsettled by a growing sense of uncertainty, which has been driven in large part by a sense that policy dynamics will be shifting in 2010.
01-Feb-10	Fix-ated: Jan. 25-29, 2010 The flight-to-safety trade continued to reign supreme as investors looked to the U.S. as a safe haven in the wake of mounting fiscal issues in the eurozone and heightened concerns that China will take further steps to curtail its economic growth.
29-Jan-10	Corporate Bonds -- Earnings Review: 29 January 2010 A brief look at some individual debt issues of companies that reported earnings Friday, how they compare to Treasuries, and how we view their valuations. Today's companies include CVX, FO, HON, and NWL.
29-Jan-10	Data Detail: Consumer Sentiment -- January 2009 Revised The University of Michigan Consumer Sentiment index increased from a preliminary reading of 72.8 to a revised 74.4. The consensus expected the index to increase 0.2 points to 73.0.
29-Jan-10	GDP Monitor -- Reconciliation of Q4 2009 GDP Real GDP for Q4 2009 came in at 5.7%. We expected GDP to grow 6.8%. The majority of the difference between our estimate and the actual GDP growth was in our forecast for inventory adjustment.
29-Jan-10	Data Detail: GDP Advance -- Q4 2009 Fourth quarter GDP increased 5.7% after posting a 2.2% increase in the third quarter. The consensus estimate called for GDP to increase 4.7%.
28-Jan-10	Corporate Bonds -- Earnings Review: 28 January 2010 A brief look at some individual debt issues of companies that reported earnings Thursday, how they compare to Treasuries, and how we view their valuations. Today's companies include MO, T, BAX, BMY, CAH, F, MOT, PG, and TWC.
28-Jan-10	GDP Monitor -- Jan. 25-28, 2010 Currently, we are forecasting a 6.8% increase to fourth quarter GDP versus a prior outlook of 6.4%.
28-Jan-10	Data Detail: Advance Durable Goods Orders -- December 2009 Durable goods orders increased 0.3% in December after falling 0.4% in November. The slight increase in orders was well below the consensus estimate that called for a 2.0% gain in new orders.
28-Jan-10	Data Detail: Initial Claims -- Jan. 17-23, 2010 The initial claims figure for the week ending Jan. 23 declined by 8,000 to 470,000 new claims. The consensus projected a much more substantial drop of 28,000 claims.
28-Jan-10	Treasury Auction Preview: 28 January 2010 A look at today's $32 bln 7-year Note auction.
27-Jan-10	Company Snapshots: 27 January 2010 A brief look at some individual debt issues of companies that reported earnings Wednesday, how they compare to Treasuries, and how we view their valuations. Today's companies include ABT, BA, CAT, COP, HBI, UTX, VLO, and WLP.
27-Jan-10	Federal Reserve Walks the Line The Federal Open Market Committee left its target rate for the federal funds rate unchanged at 0.00% to 0.25% as expected; however, the vote was not unanimous.
27-Jan-10	Treasury Auction Preview: 27 January 2010 A look at today's $42 bln 5-year Note auction.
27-Jan-10	Data Detail: New Home Sales -- December 2009 New home sales fell 7.6% in December to 342,000 new homes. The consensus expected sales to increase to 366,000 homes from November's preliminary reading of 355,000.
26-Jan-10	Company Snapshots: 26 January 2010 -- DD, GLW, JNJ, VZ, X A brief look at some individual debt issues of companies that reported earnings Tuesday, how they compare to Treasuries, and how we view their valuations.
26-Jan-10	Treasury Auction Preview: 26 January 2010 A look at today's $44 bln 2-year Note auction.
26-Jan-10	Data Detail: Consumer Confidence -- January 2010 The Conference Board's Consumer Confidence Index jumped to its highest level since the Lehman Brothers bankruptcy. At 55.9, the index beat the consensus estimate by 2.4 points.
25-Jan-10	Market Monitor: A Change in the Status Quo If the market only had the earnings news to concentrate on in the past week, we suspect there would be little concern about its ability to bounce back quickly from its losses. Instead, the market was also wrangling with moves by China to slow its economic growth, worries about sovereign debt in the eurozone, and populist politics.
25-Jan-10	Data Detail: Existing Home Sales December 2009 Existing home sales fell 16.7% to 5.450 mln in December. While a drop in sales was expected, the consensus predicted a much more modest decline of 9.8%.
25-Jan-10	Fix-ated: Jan. 19-22, 2010 Flight-to-safety ruled the week.
25-Jan-10	Halliburton Snapshot: January 2010 Halliburton's 10-year note a good relative value.
22-Jan-10	GDP Monitor -- Jan. 18-22, 2010 Real GDP for Q4 2009 was revised down this week due to weaker-than-expected housing starts data. Currently, we are forecasting a 6.4% increase to fourth quarter GDP versus a prior outlook of 6.5%.
21-Jan-10	Data Detail: Initial Claims -- Jan. 10-16, 2010 The initial claims figure jumped to its highest level since the week ending November 13 as claims increased to 482,00 for the week ending January 16. The consensus estimate called for claims to fall 6,000 to 440,000.
20-Jan-10	Data Detail: Producer Price Index -- December 2009 The Producer Price Index increased 0.2% in December, a significant slowdown from its 1.8% increase in November.
20-Jan-10	Data Detail: Housing Starts -- December 2009 Housing starts declined 4.0% in December as only 557,000 new homes were started. The consensus properly forecasted a decline, but the magnitude was off by 15,000 new homes.
19-Jan-10	Market Monitor: Earnings Season The fourth quarter earnings reporting period is expected to end a dismal, nine quarter streak of negative earnings growth rates. That streak is due to end with a bang, too.
15-Jan-10	Data Detail: Initial Claims -- Jan. 3-9, 2010 Initial unemployment claims increased by 11,000 for the week ending January 9. While an increase was expected, the jump exceeded the consensus by 7,000 claims.
15-Jan-10	Data Detail: Industrial Production -- December 2009 Industrial production grew 0.6% in December, exactly what the consensus had predicted.
15-Jan-10	Data Detail: Consumer Price Index -- December 2009 December's inflation report was very benign. Headline prices increased 0.1%, slightly less than the consensus estimate of 0.2% growth. Core prices increased 0.1%, exactly in line with consensus projections.
15-Jan-10	Data Detail: Consumer Sentiment Preliminary -- January 2010 The University of Michigan Consumer Sentiment index strengthened slightly in the January preliminary reading. The index increased from 72.5 to 72.8. The index underperformed the consensus by 1.2 points.
15-Jan-10	GDP Monitor -- Jan. 12-15, 2010 Real GDP for Q4 2009 was revised down this week on weaker-than-expected net trade and retail sales. Currently, we are forecasting a 6.5% increase for the fourth quarter GDP versus a prior outlook that was as high as 7.3%.
14-Jan-10	Data Detail: Retail Sales -- December 2009 Retail sales came in well below expectations, declining 0.3% in December. The consensus called for a 0.5% increase.
14-Jan-10	Data Detail: Business Inventories -- November 2009 Business inventories increased 0.4% in November. The consensus called for inventories to grow only 0.3%.
12-Jan-10	Data Detail: Trade Balance -- November 2009 The trade balance weakened in November as the deficit increased from $33.2 bln to $36.4 bln. The consensus anticipated the widening of the trade gap, but at a slightly smaller $34.6 bln.
11-Jan-10	Market Monitor: Not a Good Start, a Great Start The S&P 500 jumped 2.7% in the first week of trading. Still, we remain hesitant to make any big calls about what lies ahead for the market based on one week of trading in a period that has historically been a favorable one for equities.
08-Jan-10	GDP Monitor -- Jan. 4-8, 2010 Real GDP for Q4 2009 was revised upward this week on much stronger-than-anticipated wholesale inventories. Currently, we expect fourth quarter GDP to rise 7.3% q/q annualized.
04-Jan-10	Market Monitor: A Concise 2010 Outlook Our expectation is that the S&P 500 will achieve a low single-digit to low double-digit percentage return, with the first half of the year looking better than the second half of the year in terms of performance.
01-Jan-10	Economic Monthly -- An Unstable Sustainable Recovery 2010 will start off with a bang as GDP growth exceeds potential by a few percentage points in the first and second quarters. However, much of the growth is due to inventory expansion.

27-Dec-11	Data Detail: Consumer Confidence - December 2011 Consumer attitudes about the economy have fully recovered from the malaise experienced during the summer and the economic turmoil surrounding the debt ceiling negotiations. Confidence levels are at their highest point since April.
27-Dec-11	Fixedated: December 19 - 23, 2011 Treasuries were not on the shopping lists of many participants last week as the long end of the curve saw a fairly dramatic selloff. Corporates were mixed for the week. HY bonds gained as the safety trade weakened. IG debt followed Treasuries to high yields. Munis were stable last week with very little new supply.
23-Dec-11	GDP Monitor: Dec. 19 - 23, 2011 Weaker business investment data was not enough to keep our fourth quarter GDP forecast from falling below 3.0%. GDP is still on track for its best performance since Q2 2010.
23-Dec-11	Data Detail: Durable Goods Orders, PCE (Nov-11) Business investment demand contracted for the second consecutive month. Worse for fourth quarter GDP, shipments of nondefense capital goods declined for the third consecutive month. Yet, the underlying data suggest the drop in investment demand is just a temporary blip.
21-Dec-11	Data Detail: Existing Home Sales - November 2011 The National Association of Realtors announced sweeping downward revisions to the existing home sale data going back to 2007. The revisions, due mostly to double counting, reduced overall sales by an average of 14.3% each month. The housing situation is, undoubtedly, in much worse shape than previously thought.
20-Dec-11	Data Detail: Housing Starts - November 2011 A spike in multifamily construction drove housing starts in November to their highest level since April 2010 when the homebuyer tax credit artificially boosted production. Excluding that one-time event, housing starts are at their highest level since October 2008.
19-Dec-11	Fixedated: December 12 - 16, 2011 Treasuries benefited from a directionless Europe as the 10- and 30-year issues hit yields not seen since early October. Last week’s auctions saw demand levels near the highs of the year. IG corporates kept pace with the rally in Treasuries, dropping 16 bps. HY bonds lagged, moving just 1 bp lower. Munis gained a bit on the week, but lagged Treasuries, thereby increasing their relative value on a percentage-of basis.
16-Dec-11	GDP Monitor: Dec. 12 - 16, 2011 As we head into 2012, the U.S. economy is starting to pick up steam. The initial claims level fell to its lowest level since before the Lehman bankruptcy in 2008; manufacturing demand in the Philadelphia and New York regions edged higher; and consumer sentiment is at its highest point since June. The pieces are in place for growth possibly to exceed expectations next year.
16-Dec-11	Data Detail: Inflation - November 2011 Inflationary pressures remained soft in November. There was nothing unusual in either the core CPI or core PPI data that suggests inflationary problems may be gaining traction as we head into 2012.
15-Dec-11	Data Detail: Industrial Production - November 2011 The manufacturing sector has been running hot for several months. According to the latest Industrial Production report, however, that changed in November as total production, led by a 0.4% drop in manufacturing production, declined 0.2%. A slight pullback in manufacturing production after several strong months is not unusual or a sign of trending weakness. In fact, the first two regional manufacturing surveys for December already showed substantial improvement.
13-Dec-11	Market Monitor: FOMC Sounds Familiar Message The policy directive from the December 13 FOMC meeting can best be described as being another dovish statement. It is possible to make such a characterization because that is what we said about the policy directive from the November 2 meeting and, with the exception of a few subtle changes, the two directives read very much the same on the key points. Even the vote played out in the same fashion. All FOMC members voted for the policy action with the exception of Chicago Fed President Evans, who supported additional policy accommodation at this time (just as he did in November).
13-Dec-11	Data Detail: Retail Sales - November 2011 The November employment report showed that payroll growth was completely offset by declining hourly wages. Aggregate earnings were flat in November. The small retail sales gain in November, therefore, is in-line with the weakness in earnings.
12-Dec-11	Fixedated: December 5 - 9, 2011 Treasuries ended the week slightly weaker at the long end of the curve as hopes that Europe’s debt crisis can be contained continued to spring eternal. However, Europe’s leaders appear to be recycling sound bites that offer little in the way of credible solutions. Corporates ended the week slightly positive. The HY index has rallied 44 bps since touching 9.04% on November 25. The FactSet 10-year AAA Muni Index touched an all-time low of 2.38% last week. At 115% of the 10-year UST, the relative value argument is losing steam.
09-Dec-11	GDP Monitor: Dec. 5 - 9, 2011 Our GDP forecast for the fourth quarter again topped 3.0% this week. Inventory gains, however, currently account for 1.3 percentage points of fourth quarter GDP growth. Excluding inventories, real final sales are expected to increase 1.9%. That is well below the 3.6% increase in the third quarter, but in-line with our low/moderate growth expectations.
09-Dec-11	Data Detail: Trade Balance - October 2011 A stronger dollar, a recessionary environment in Europe, and a slowdown in Asia are all expected to contribute to lower export growth in the medium term. Yet, the drop in exports in October did not come from the usual suspects. Lower prices for gold and other precious metals led to a drop in demand for these goods that was enough to cause overall exports to slip.
06-Dec-11	What a Drag: Fiscal Austerity to Reduce 2012 GDP Congress is currently debating whether to extend emergency unemployment benefits and a 2% payroll tax cut. If Congress fails to pass both extensions, we will be forced to reduce our forecast for 2012 GDP from 2.1% to between 1.1% and 1.7%.
05-Dec-11	Fixedated: November 28 - December 2, 2011 Treasuries ended last week mostly on a down note as equities took control of the trading environment. The reaction was fairly strong given that not much has changed regarding the European debt crisis. Yes, the announcement that central banks will coordinate dollar funding as needed showed that leaders are thinking ahead about necessary backstops. However, the need for backstop implies that a failure is still possible. Corporates were positive for the week as the “risk on” equity trade pushed the HY index to a markedly lower yield. Munis were steady as the market digested a fair amount of new supply.
02-Dec-11	GDP Monitor: Nov. 28 - Dec. 2, 2011 While retailers are being lauded for strong Black Friday sales levels, we are slightly concerned that sales growth in December and January may not remain up to par. The November employment report revealed no growth in aggregate wages.
02-Dec-11	Data Detail: Employment Report - November 2011 While most of the attention regarding the November employment report will be focused on the big drop in the unemployment rate, which fell from 9.0% to 8.6%, the more informative, and in this case concerning, piece of news was that hourly earnings fell 0.1%. That drop completely offset the increase in payrolls, which led to no earnings growth in November.
01-Dec-11	Data Detail: Construction Spending (Oct-11), ISM (Nov-11) A surge in construction spending in October developed from strong gains in the home improvement sector. Unfortunately, this sector is extremely volatile and tends to follow a sawtooth pattern. If spending remains on trend and reverses in November, most of the October construction gains may be wiped away.
30-Nov-11	Central Banks Travel Familiar (and Rocky) Road The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank announced a coordinated action to enhance their capacity to provide liquidity support to the global financial system. The announcement was a surprise and global equity markets soared in its wake. The experience of recent years has shown, however, that coordinated central bank action is mostly a stopgap for markets undone by an inability to solve fiscal problems. That is, it stops the internal bleeding, but it does not fix what is broken on the outside.
30-Nov-11	Trend Watch: Nov. 7 - 25, 2011 Corporate bonds spreads have returned to elevated levels. At this point, we believe that both high yield and investment grade offer ample relative value to U.S. Treasuries. We discuss that point in this week's Trend Watch, along with other views including the trends in consumer and real estate lending, a disparity between earnings growth and price performance by sector, and the potential growth in desalination technology to meet rising water demand.
28-Nov-11	Data Detail: Home Sales - October 2011 Modest growth in home sales in October does not change the realities on the ground. Weak employment and income growth, combined with elevated inventory levels in the existing home sector, will hinder future potential gains over the next several months, if not years.
28-Nov-11	GDP Monitor: Nov. 21 - 26, 2011 What a difference a week makes. After seeing our Q4 GDP projection rise above 3.0%, lackluster consumption and investment data quickly lowered our estimate back to around 2.0%. This is not the result of a change in growth trends. As we alluded to last week, the data simply reflect the low/moderate growth path that has been expected.
28-Nov-11	Fixedated: November 21 - 25, 2011 Treasuries were in high demand last week as concerns that Germany would follow France’s path to higher yields gripped the market. However, that sentiment was reversed over the weekend. The key for Treasuries is how sensitive they are to European headlines. The 10-year moved from a low of 1.88% on Wednesday to 2.08% this morning. Corporates took a step back as HY bonds broke through the 9.00% level for the first time since October 18. The FactSet 10-year AAA Muni Index closed the week at 133% of the 10-year UST.
23-Nov-11	Briefing Research Multinational Equity Basket To request the complete basket, please contact your Institutional Salesperson, Jason Green, at 312-281-5484 or jgreen@briefing.com.
23-Nov-11	Institutional Long Equity Allocation -- Q3 2011 Institutional investors in aggregate increased their consumer discretionary, technology, and utilities long equity allocation in Q3 2011 relative to the S&P 1500. They decreased their consumer staples, energy, health care, industrials and materials allocation. Hedge funds increased long equity holdings in both energy and tech by 0.8 percentage points relative to the S&P 1500. While hedge funds reduced their holdings in consumer discretionary by 0.5 percentage points, they remain overweight by 7.6 percentage points. Money flowed into fixed income ETFs at a faster rate than domestic and international equity ETFs for the second consecutive quarter.
23-Nov-11	Data Detail: PCE, Durable Orders (Oct-11) After declining precipitously over the past three months, the personal savings rate picked up modestly in October. If the savings rate continues to rise and the labor sector fails to improve substantially over the next two months, consumption growth, which helped push GDP higher in the third quarter, may not be as strong in the fourth quarter.
21-Nov-11	Fixedated: Nov 14 - 18, 2011 Treasury yields fluctuated quite a bit, but closed the week in the black. Europe and the not-so “super committee” are helping to keep yields low. And with France now in Moody’s crosshairs, USTs will likely continue to catch the safety bid. Corporates saw minor loses last week, but the rise in yields was fairly mild. Munis continue to defy the gloom-and-doom predictions of the past year or so.
18-Nov-11	GDP Monitor: Nov. 14 - 18, 2011 Our latest GDP forecast for the fourth quarter jumped above 3.0%. While this seemingly goes against our view of low/moderate growth for the next few quarters, the structural problems in the economy remain intact. We do not expect growth to remain at this elevated level.
17-Nov-11	Data Detail: Housing Starts - October 2011 For the first time since the end of the housing bubble in 2006, homebuilders increased the number of homes currently under construction for two consecutive months. While it is too early to call a bottom in the residential construction sector, it is an encouraging sign.
16-Nov-11	Data Detail: Inflation, Industrial Production (Oct-11) Both producer and consumer prices saw their first month-over-month decline since June. The drop was not caused by deflationary pressures stemming from the usual suspects of high unemployment and low wage growth. Instead, it was due to the timing of the BLS surveys.
15-Nov-11	Data Detail: Retail Sales - October 2011 Lackluster employment and wage gains were not enough to deter consumers in October. Core spending – which matches up best to the consumption growth levels in GDP – increased by its largest amount since March. The economic recovery continues to move ahead unabated.
14-Nov-11	Fixedated: November 7 - 11, 2011 Treasuries traded in a fairly wide range last week as the Euro debt crisis once again gripped the market. Auction results were mixed. Tepid demand for the longer-maturity auctions may indicate that investors are not comfortable with current yields even with the situation in Europe being far from over. We expect more bumpy days to come. Corporate yields were higher across the board with HY taking the bigger hit. Munis were steady once again as several large deals got taken down with relative ease.
11-Nov-11	GDP Monitor: Nov. 7 - 11, 2011 The economic situation in the U.S. took a back seat this week to turmoil in Europe. Both Greece and Italy saw bond yields spike yet again as fears of a sovereign default escalated. At this time, a potential default in Europe would most likely not lead the U.S. into another recession.
09-Nov-11	Trend Watch: Oct. 24 - Nov. 4, 2011 The Federal Reserve released a batch of credit metrics this week that showed unrealized expectations for a U.S. recession and the eurozone debt crisis slowed, but did not derail, the improvement in the credit market. We discuss that point in this week's Trend Watch, along with other views including how motor vehicle producers may have to cut prices to incentivize demand and how it may be high time for U.S. companies to boost their payout ratios.
07-Nov-11	Fixedated: October 31 - November 4, 2011 Treasuries caught the safety-trade bid again as the situation in Greece and the rest of Europe became more convoluted than ever. Yields on the 10-year Treasury fell 28 bps last week to 2.04%. That was the lowest, ending-week yield since reaching 1.92% in the immediate aftermath of Operation Twist being announced in September. Corporates were mixed with investment grade gaining ground and high yield slipping a bit. Separately, munis rebounded some with participants receptive to an increase in new issuance.
04-Nov-11	U.S. Economic Outlook: Welcome, Finally, to the New Normal With GDP increasing 2.5% in the third quarter, the U.S. economy was nowhere near recession and is not positioned to enter a second recession in the near future. We expect growth to continue at a stable and consistent pace, albeit much slower than we (and most others) would like. The structural problems in the economy -- overleveraged consumers, excess supply of housing, constrained lending -- that helped create the recession have not been resolved. These overhangs will remain primary drags on the economy and will prevent growth from returning to potential levels (2.7% - 3.0%) through 2012.
04-Nov-11	Data Detail: Employment Report - October 2011 The employment situation in October was not materially different from the previous month. The payroll numbers in September were affected by the return of 40,000 workers following a strike at Verizon Communications (VZ). After adjusting for the strike, September employment numbers increased 118,000. The October employment figure was only 38,000 less, within tolerances for normal monthly volatility.
02-Nov-11	Market Monitor: A Telling FOMC Vote There was a dissenting vote cast at the November 1-2 FOMC meeting, only it was not from any of the members that have been identified in the past as being hawks. The dissent came from Chicago Fed President Evans, who supported additional policy accommodation at this time. As notable as the dissent was from Mr. Evans, it was perhaps not as noteworthy as the fact that Dallas Fed President Fisher, Minneapolis Fed President Kocherlakota, and Philadelphia Fed President Plosser fell into line with the consensus view at the November meeting. In this note, we assess what the latest vote, and remarks from Fed Chairman Bernanke's press conference, might mean for future monetary policy.
01-Nov-11	Data Detail: ISM (Oct-11), Construction Spending (Sep-11) After a small turnaround in September, the ISM Manufacturing Index again showed weakness in the manufacturing sector in October and is in danger of slipping into a contraction. Yet, the index has not conformed to the performance from the durable goods reports. This suggests that large manufacturing firms remain on steady ground while smaller companies are struggling.
31-Oct-11	The Eurozone Debt Crisis: From Greco to Roman Wrestling The rescue framework provided by the EU on October 26 created more questions than answers because it was short on detail. That important shortcoming has arguably precipitated a jump in borrowing costs for Italy since the announcement, which seems to be taking over for Greece as the key risk gauge for the capital markets. Due to the lack of clarity from European leaders and the confusion derived from media-driven speculation, we wanted to approach the current situation in as linear a fashion as possible. This report outlines the concerns about Italy, as well as the next steps for Greece, the European bank recapitalization plan, and the new European Financial Stability Facility. In addition, we highlight dates to watch and consider what could go wrong as this intricate but delicate process for saving the eurozone unfolds.
31-Oct-11	Fixedated: October 24 - 28, 2011 Last week’s Treasury auctions went well, aside from a drop in foreign interest for the 7-year sale. The announcement that Europe’s leaders had yet another plan to corral the debt crisis spurred a sell-off in USTs, which was reversed when investors realized that the “plan” was more of a “maybe if we…” At this point, we think it is fair to say that the market is unimpressed. Corporates continue to do well as HY debt rallied another 58 bps last week. Munis lost a bit of ground, but still outperformed Treasuries.
28-Oct-11	GDP Monitor: Reconciliation with Q3 2011 GDP There were no notable surprises to us in the Q3 2011 GDP report. Just about every sector showed modest strength and the data were enough to confirm that growth in the third quarter was much better than feared and that the U.S. is not in any immediate danger of falling back into recession.
28-Oct-11	Data Detail: Personal Income and Spending - September 2011 All of the data in the September personal income and spending report were already incorporated into the advance third quarter GDP release. It has no bearing on any future revisions to GDP.
26-Oct-11	Trend Watch: Oct. 3 - 21, 2011 A look at historical earnings estimate data shows sell-side analysts tend to underestimate the current quarter and overestimate future quarters. Indeed, sell-side analysts lowered expectations for Q3 2011 S&P 500 earnings across all sectors over the past few months. Through October 25, 73% of S&P 500 companies have reported earnings that exceeded expectations. We discuss that point in this week's earnings-inspired Trend Watch, along with other views that include how Caterpillar's results underscore the strength of the commodity super cycle. We also update the trend in corporate bond spreads following this month's stunning advance in high-yield bonds.
26-Oct-11	Data Detail: Durable Goods Orders, Home Sales (Oct-11) The regional manufacturing surveys could not keep pace with the actual orders data in September. Orders outside of the transportation sector surged, suggesting that large manufacturers are still seeing demand growth while smaller companies are slogging through the recovery. After the final two economic releases before the advance release of Q3 2011 GDP, our GDP forecast was revised up from 2.0% to 2.1% on stronger-than-expected business investment demand.
25-Oct-11	Data Detail: Consumer Confidence - October 2011 Consumer confidence fell in October to its lowest level since March 2009. While the headline is disappointing, it should have no affect on the economic recovery. Economic data have improved substantially since the beginning of the summer and the lack of confidence is a primary result of media reports showcasing perceived pitfalls and not from a deceleration in actual growth.
24-Oct-11	Fixedated: October 17 - 21, 2011 Investors once again tuned into the dialogue coming from Europe last week as hopes ran high for a new turn in a tired script. Unfortunately, what they got were mostly repeats of As the Euro Turns. Treasury yields continue to benefit from the lack of action. Corporates did well last week. The advance in the ML U.S. HY Mstr II Index has been stunning as the widely followed benchmark’s yield has fallen 143 bps since October 4. Munis gained a bit as last week’s larger deals – including $2 bln California state GOs – were well received.
21-Oct-11	GDP Monitor: Oct. 17 - 21, 2011 The first look at third quarter GDP will be released on Thursday. We are currently projecting growth at 2.0% for the quarter. While this is below potential (2.7% - 3.0%) and weaker than our GDP forecast from earlier in the month, it remains within the bounds of a low-growth recovery scenario. There is nothing in the data that suggests a second recession is near.
19-Oct-11	Data Detail: Housing Starts, Inflation (Sep-11) A surge in multi-family construction led to the largest number of new home starts since the home buyer tax credit artificially boosted production in April 2010. The gains, however, are unlikely to be sustainable as multi-family construction should return to its long-term average in October.
17-Oct-11	Data Detail: Industrial Production - September 2011 Weak regional manufacturing surveys had no bearing on the national production data as overall manufacturing production saw a healthy gain in September. The discrepancy between the surveys and the national levels suggests that bigger manufacturing companies are experiencing higher demand than the more numerous smaller firms.
17-Oct-11	Fixedated: October 10 - 14, 2011 Treasuries lost ground on the week, undercut by modestly stronger economic data and the hope that the worst-case scenario for the European debt crisis is now essentially off the table. The Treasury auctions saw strong interest from primary dealers. Corporates were positive on the week as HY came roaring back, dropping 62 bps (and 97 bps since October 4). Munis were stable as the FactSet 10-year AAA Muni Index moved down just 1 bp. California is readying a $2 bln GO sale this week which we believe may offer a compelling relative value.
14-Oct-11	GDP Monitor: Oct. 10 - 14, 2011 The retail sales data put another dent into the recession talk as sales not only beat high expectations, but also increased by their strongest amount since February. That was before the exogenous shocks, such as the Arab Spring and Japanese tsunami, began to adversely affect the U.S. economy. This suggests that economic trends may be returning to where they were expected to be at the end of Q4 2010.
14-Oct-11	Data Detail: Retail Sales - September 2011 While many economists discount the consumer’s current ability to lead the U.S. to economic growth, the September retail sales report shows that the strong consumption growth cannot be counted out.
13-Oct-11	Data Detail: Trade Balance - August 2011 Even though the July trade deficit level increased from its preliminary reading and the August deficit remained at that elevated level, the average deficit over the past two months is substantially lower the second quarter levels. This will lead to a positive contribution to GDP.
10-Oct-11	Fixedated: October 3 - 7, 2011 Treasury yields saw a big push higher last week on decent U.S. economic numbers and renewed hope that the European debt crisis will be contained. However, after almost a year of reassurances and promises, we are starting to think that European leaders might need refreshers on the meaning of the words "rescue" and "bailout." Corporates were under pressure as well as the HY index broke 10% for the first time in over two years before settling at 9.76%. The relative-value trade remains intact for munis as the FactSet 10-year AAA Muni Index stands at 132% of the 10-year UST.
07-Oct-11	GDP Monitor: Oct. 3 - 7, 2011 Even as the data strengthens, economists and politicians have increased their rhetoric on the supposed weakness with economy. President Obama continues to stump for support of another stimulus package. However, that may not be needed. The truth is that the economy remains on a stable, but moderate, growth path and a second recession is unlikely. New stimulus may not help as much as economists expect.
07-Oct-11	Data Detail: Employment Situation Report - September 2011 While most of the discussion following the September Employment Situation Report revolved around the positive headline surprises in both total and private payrolls, the key to the report was actually the boost in weekly hours and average earnings. These data points not only support strong consumption growth, but also put a dent in the likelihood of an upcoming recession.
05-Oct-11	Trend Watch: Sep. 19 - 30, 2011 As the governments of the U.S. and China quarrel over currency valuations and trade, we continue to hear calls for the U.S. dollar to lose its reserve status. We have been providing what should be fairly obvious counterarguments; in short, the U.S. has the world's largest debt market (by a wide margin), is the most established capitalistic society, and remains the world's largest economy and importer. What is lost in this argument? The secular trend away from the dollar has been ongoing for over a decade. We discuss that point in this week's Trend Watch, along with other views including the relative value of municipal bonds, the risk-reward trade-off in corporate bonds, and using Chile's stock market to trade copper.
03-Oct-11	A Preoccupied Consensus View Over the last few weeks, the consensus economic view dropped precipitously and optimism turned to extreme pessimism. Instead of potential growth, many Wall Street economists now warn about the elevated risks of another recession occurring in the near future. Our forecast has followed a "low-growth" scenario since the spring. In our view, we do not think the data signal another recession. Instead, we believe the economy will continue to muddle through with sluggish growth like it did in the first half of 2011. Ironically, our expectations now put us in the more optimistic range of forecasters.
03-Oct-11	Data Detail: ISM (Sep-11), Construction Spending (Aug-11) Despite signs of a potential contraction, the ISM Index held its ground and remained above the expansion/contraction threshold in September. Sustained growth, however, looks increasingly unlikely as manufacturers struggle with low demand.
03-Oct-11	Fixedated: September 26 - 30, 2011 Treasury yields pushed higher early in the week, but reversed course as mostly modest economic data put the safety trade back in vogue. While the U.S. economy may still be struggling to find firm footing, the Treasury market seems to be wearing anti-gravity boots. Corporate yields were up on the week. The IG index rose 17 bps; however, the HY index rose 51 bps, which pushed its spread to the 10-year UST to more than 750 bps for the first time since mid-September 2009. Munis continue to offer good relative value as the FactSet 10-yr AAA Muni Index stands at 132.8% of the 10-yr UST.
30-Sep-11	GDP Monitor: Sep. 26 - 30, 2011 What recession? Our third quarter GDP estimate has quietly increased back into potential growth territory (2.7% - 3.0%). That would be the strongest GDP increase since Q2 2010. The big concern, however, is that these GDP gains are unsustainable and that economic weakness will return next quarter.
30-Sep-11	Data Detail: Personal Income and Spending - August 2011 Typically, economists discount the effects expected by shifts in consumer confidence. Confidence in August initially declined to its lowest level since 1980. That severe of a drop justified an expectation that consumers would pull back on spending and increase savings amid uncertain times. The opposite actually occurred.
29-Sep-11	Market Monitor: Finding Opportunity in Low/High Correlations During periods of high volatility in the capital markets, correlation between investable assets tends to increase. That has been readily apparent in recent weeks as macro concerns have trumped fundamentals as an equity market driver. We took a look at the S&P 500 universe to see which stocks had the lowest correlation during this tumultuous period. We did not stop there, though. Our main objective was to pinpoint companies with a strong balance sheet that justified the low correlation or, alternatively, validated the idea that some stocks with a high correlation may have been unjustifiably thrown out with the bath water.
28-Sep-11	Data Detail: Durable Goods Orders - August 2011 A clear divergence in manufacturing demand developed in August. Demand for finished goods surged while input demand contracted. It seems manufacturers do not believe the August gains in finished goods will last.
27-Sep-11	Data Detail: Consumer Confidence - September 2011 After falling to its worst level since the end of the Great Recession, consumer confidence came in virtually unchanged in September. Normally, changes in confidence are aligned with changes in employment, gasoline/oil prices, stock market growth, and media reports. The underlying details have not shifted much since August.
26-Sep-11	Data Detail: Home Sales - August 2011 Existing home sales unexpectedly increased in August. The growth was not only at odds with both the Pending Home Sales Index and the Mortgage Bankers Association's Mortgage Purchase Index, but also contrasted with the latest new home sales report. Even though the underlying data is expected to continue to weaken, there is some hope that existing home sales will also improve in September.
26-Sep-11	Fixedated: September 19 - 23, 2011 Treasury yields took a whole new step lower with the formal announcement of Operation Twist. Reports indicate that the G20 nations are pressing Europe's leaders to be more aggressive, that there may be a push to recapitalize European banks if necessary, and that the haircut participation rate for Greek debt is inching towards 90%. The inertia holding back European leaders from taking aggressive action will no longer do. Corporates were mixed for the week as the HY index rose 38 bps and hit 9.00% for the first time since July 2010 while the IG index was unchanged. The FactSet AAA 10-year Muni Index moved to 140% of Treasuries before settling at 132%.
23-Sep-11	GDP Monitor: Sep. 19 - 23, 2011 As expected, the Fed implemented "Operation Twist" on Wednesday as a means to drive down long-term interest rates. While the goal is laudable given the recent downgrades to many economic forecasts, including the ones from the Fed and IMF, the actual economic effect will most likely be minimal.
22-Sep-11	An Argentinean Lesson for the Greeks The Greek debt crisis has drawn some comparisons to Argentina's financial crisis of 2001. The latter ultimately led to a devaluation of the peso and a debt restructuring. As an exercise, we compared the current Greek crisis with the chronology of events surrounding the Argentine crisis. The similarities are striking.
22-Sep-11	Trend Watch: Aug. 29 - Sep. 16, 2011 It is certainly plausible that economic growth will surprise to the upside as many of the constraints that hindered consumer spending and manufacturing for the first half of the year are gone. It could result in GDP exceeding the low/no growth scenario currently projected by the IMF and other prominent economists. The wildcard, however, is the only major exogenous shock that remains: the eurozone debt crisis. We discuss that point in this week's Trend Watch, along with other views that include the potential for increased social strife in the U.S. and how any real estate recovery will likely be limited, despite historically attractive pricing fundamentals.
21-Sep-11	Market Monitor: Fed Twists, Market Shouts As expected, the FOMC unveiled the modern-day version of "Operation Twist," saying it will buy $400 bln of Treasury securities with remaining maturities of 6 to 30 years by the end of June 2012 and selling an equal amount of Treasury securities with remaining maturities of 3 years or less. The knee-jerk reaction by the equity market to the announcement was not a positive one. Nonetheless, the effort to hold down long-term rates simply reinforced our view that the U.S. equity market offers tremendous relative value for long-term investors compared to Treasuries.
20-Sep-11	Data Detail: Housing Starts - August 2011 The data on homes under construction and permits showcased polar opposite viewpoints in August. On one hand, the lack of growth in the number of homes under construction suggests that builders remain cautious about future inventory levels. On the other hand, the rise in permits suggests construction growth may return in the coming months.
19-Sep-11	GDP Monitor: Sep. 12 - 16, 2011 It may seem unusual to be excited about economic data coming in flat, but with the market beginning to price in a potential double-dip recession, no growth is a better outcome than negative growth.
19-Sep-11	Fixedated: September 12 - 16, 2011 Treasuries were slightly weaker last week, but the 10-year held around 2.00% on European debt concerns. Last week’s auctions saw mixed demand with the 30-year emerging as the big winner as some participants positioned themselves for the implementation of Operation Twist. If the Fed announces something else, buyers may have a problem. Corporates were mixed. The IG spread to the 10-year UST is at its widest in more than two years. Munis continued to move sideways. California will hold its first general obligation sale of the year. Friday’s preliminary 30-year yield was 4.80% – or a 6.67% tax-equivalent yield for the 28% tax bracket – more than double the yield on the 30-year UST.
14-Sep-11	Europe's Greek Tragedy With dates upcoming that could define a new direction for the eurozone debt crisis, our feeling is that European governments have slowly begun to accept the idea of letting Greece default. That opinion seems to be growing in popularity. After running through various scenarios, it seems obvious European governments will have to act at some point -- and with much more conviction than they have to date. Options include a European TARP, bank privatization, and a larger lending facility. The best solution -- a eurozone debt market -- seems unachievable in the near term, but not beyond possibility. In this note, we examine the dynamic situation that is Europe's Greek tragedy.
12-Sep-11	Fixedated: September 6 - 9, 2011 Treasuries continued to run lower on the flight-to-safety trade. In Europe, the feeling seems to be that someone needs to bring out a bazooka to address the debt crisis. At this point, participants appear to be preparing for some type of a restructuring from Greece. Corporates were mixed on the week as HY suffered a bit from the market's overall aversion to risk while IG traded sideways. Muni yields pushed to new lows as the FactSet 10-year AAA Muni Index hit 2.50%. At 130% of the 10-year UST, crossover buyers can still find value.
09-Sep-11	GDP Monitor: Sep. 06 - 09, 2011 President Obama unveiled a $447 bln joint spending and tax reduction plan aimed at reducing the unemployment rate. The Republican-controlled Congress, however, most likely will only pass a $175 bln package that just includes payroll tax cuts and an extension in unemployment benefits. Using calculations developed in our Dec. 28, 2010 report: "Unconventional Wisdom: Poking Holes in Rosy 2011 GDP Views," the $175 bln package is expected to add between 0.4% and 0.9% to 2012 GDP growth.
08-Sep-11	A Presidential Challenge: Driving Growth through Labor An interesting question was posed to us on the eve of President Obama's jobs speech: What would be better for the economy? Getting the 90% of workers with jobs to increase their spending or reducing the unemployment rate from 9% to 6%?
08-Sep-11	Data Detail: Trade Balance - July 2011 The U.S. trade deficit narrowed in July to its lowest point since April as exports rallied and imports waned. The growth in exports, however, may not be long-lasting as more austerity and weak growth in Europe could potentially lower demand for U.S. goods. If export demand shrinks in the coming months, the August gain in the trade deficit may be just an outlier.
06-Sep-11	Fixedated: August 29 - September 2, 2011 Over the holiday weekend, my 12 lb. dog and I were confronted by a rattlesnake. I had to decide, do I grab a broom handle or a shotgun? The answer? A shotgun. Let us hope President Obama and Congress feel the same way because the capital markets need someone to get out there and make some noise -- action and ammo. Corporates rallied last week. Some participants sought safety in IG bonds while others looked for extra yield in HY debt. Munis continued to edge lower. The FactSet AAA 10-year Muni Index now stands at 127% of the 10-year UST.
02-Sep-11	GDP Monitor: Aug. 29 - Sep. 02, 2011 The employment report renewed fears that the economy may be headed for another recession. While we do not foresee two consecutive quarters of negative growth, the outlook for the third quarter has softened measurably after the employment report showed negative wage growth in August. A negative third quarter growth rate is not out of the realm of possibilities.
02-Sep-11	Data Detail: Employment Report - August 2011 While the media is concentrating on the weak headline payroll numbers, the more concerning aspect of the August employment report was the combined downturn in hours and earnings. Using those data points, aggregate wages fell 0.4% in August and most likely will lead to negative consumption levels that month.
01-Sep-11	Data Detail: ISM (Aug-2011), Construction (July-2011) All of the regional manufacturing surveys except for the Chicago PMI contracted in August. Furthermore, the underlying orders and production indices in the ISM index both contracted. Taken together, the August expansion confirmed by the ISM Index may only be a one-month respite before a contraction officially begins in September.
31-Aug-11	Trend Watch: Aug. 15 - 26, 2011 With home prices still declining and interest rates at historical lows, the spread between owning and renting has fallen from just over $700 to roughly $200 per month. It would not be surprising to see the spread turn negative in the near future. At that point, it would make more financial sense to own a home than to rent. We discuss that point in this week's Trend Watch, along with other views that include utilizing yields on utilities that have risen to record levels against Treasuries, a potential bubble in farm prices, and choosing investment-grade or high-yield corporate bonds based on one's economic view.
30-Aug-11	Institutional Long Equity Allocation -- Q2 2011 Institutional investors in aggregate increased their financial, health care, industrials and materials long equity allocation in Q2 2011 relative to the S&P 1500. They decreased their technology, consumer staples, telecom and utilities long equity allocation. Money flowed into fixed income ETFs at a faster rate than domestic equity ETFs. Money flowed out of commodity ETFs. Hedge funds increased long equity holdings in technology by 1.2 percentage points relative to the S&P 1500 and are now overweight by 2.0 percentage points.
30-Aug-11	Data Detail: Consumer Confidence - August 2011 The deterioration in the Consumer Confidence Index was most likely a reaction to media reports surrounding the debt ceiling negotiations. The reality of the situation is that economic growth prospects are nowhere near as bad as they were in 2008 and 2009.
29-Aug-11	Data Detail: Personal Income and Spending - July 2011 Even though real consumption spending increased in July by its largest amount since December 2009, fears of a downtrodden consumer remain intact. Consumer sentiment plunged to historical lows in August. Unless August sales reports tell otherwise, the spike in spending in July was most likely temporary.
29-Aug-11	Fixedated: August 23 - 26, 2011 Treasuries ended on a down note last week, but were relatively stable as the 10-year traded in a range of about 20 bps. Considering the prior week saw a 30 bp range, and the week before that it was 50 bps, 20 bps is downright boring. Corporates were also weak and both the IG and HY spreads to Treasuries have been at levels not seen in quite some time. Munis ended the week a touch to the downside, but the FactSet AAA 10-year Muni Index is still registering levels in a range not seen in nearly a year.
26-Aug-11	GDP Monitor: Aug. 22 - 26, 2011 All week, media reports centered on the possibility that the Fed was going to tackle the on-going weakness in economic growth with another round of quantitative easing. As we mentioned last week, while softer than most would like, the economic prognosis is still positive and a recession is unlikely. There is no need to implement more monetary easing at this time.
26-Aug-11	Market Monitor: Bernanke Passes Stimulus Buck to Congress The Fed chairman's speech at the Jackson Hole Symposium went largely as expected, but not entirely as expected. The impression we got from today's speech is that Mr. Bernanke is trying to transfer the stimulus onus to Congress and fiscal policy. The Fed will act if it has to, but it would prefer Congress take the proper fiscal path so it does not have to. That is no sure bet at this juncture, which is why it is not a sure bet that QE3, or some form of additional monetary stimulus, is a non-possibility.
24-Aug-11	Data Detail: Durable Goods Orders - July 2011 The headline growth numbers in the July durable goods orders report highlighted a strong manufacturing sector. A look at the details, however, shows that the data were notably skewed by unsustainable surges in aircraft and metals demand. Excluding these sectors, the manufacturing sector contracted at a substantial rate.
23-Aug-11	Data Detail: Home Sales - July 2011 The rebound in the housing sector remains off in the distance as demand for new and existing homes slipped in July. For new homes sales, this was the third consecutive monthly decline. For existing homes, sales were at their lowest level since November 2010. Neither of these trends signals incoming strength to the sector.
23-Aug-11	Market Monitor: A Valuation Snapshot of Emerging Markets Despite the recent market turmoil, we continue to see relative value in U.S. equities, specifically in large-cap, U.S. multinationals with exposure to emerging economies. This strategy enables investors to take advantage of attractive valuations and the favorable growth prospects in emerging markets, while also capturing the dividend payments of U.S. firms. In this report, we provide a truncated list of U.S. companies with exposure to the Asia-Pacific, Latin America, and Eastern Europe, Middle East, and Africa regions. In addition, we outline country valuations in each region. These emerging markets have corrected in tandem with the Western world as risk has been taken off the table.
22-Aug-11	Fixedated: August 15 - 19, 2011 Treasury yields were pushed lower as investors sought safety in a market where multiple uncertainties appeared to capture participants' angst all at once -- even if none were new developments. When uncertainty reigns, it is good to be the king. Safety, thy name is Treasuries. Despite the flight to Treasuries, IG and HY corporates advanced as risk aversion abated a bit. At 465 bps, the HY to IG spread is at a level not seen since late 2009 and is up 181 bps since July 25. Munis continued to garner interest as investors sought shelter in IG debt.
19-Aug-11	GDP Monitor: Aug. 15 - 19, 2011 The equity markets are panicking and the Treasury yield curve has flattened on the anticipation that the U.S. may be on the precipice of entering another recession. The economic data, while weak, remain firmly in positive territory. At this time, we believe the reactions in the marketplace are overblown.
18-Aug-11	Data Detail: Inflation - July 2011 Inflation has trended higher for the past several months, but there is no danger of experiencing a stagflation environment. The surge in prices in July can be explained by one-time shocks and poor seasonal adjustment factors. Thus, the increase is not indicative of sustained, accelerating price growth.
17-Aug-11	Trend Watch: July 25 - August 12, 2011 S&P's downgrade of the U.S. sovereign credit rating initiated a flight to quality that was supportive of both Treasuries and investment-grade debt. Equities and high-yield bonds were left out in the cold. The last few days have see a slight reversal in that trend, however, at least as it pertains to corporate bonds. We discuss that point in this week's Trend Watch, along with other views including the potential effect of contingent convertible bonds on equities and preferreds, signs of a rebound in consumer lending, and a long-term argument against the dollar.
16-Aug-11	Data Detail: Housing Starts, Industrial Production (July-11) The number of homes currently under construction increased on a monthly basis in June for the first time since May 2006. That increase turned out to be a part of a weather-induced surge in construction projects and not the start of the recovery we hoped for. The downward trend in construction returned in July as the number of home currently under construction again reached historical lows.
15-Aug-11	Briefing Research Chart Book: Aug. 15, 2011 The structural problems stemming from high debt loads will prevent consumption from growing at levels needed to sustain 3.0% overall GDP growth. Instead, a new, lower normal potential growth rate of 2.5% may be the best that can be obtained over the next several quarters. We do not foresee the U.S. re-entering a recession in the coming year. The data suggest the U.S. equity market is attractively priced on an historical basis and vis-a-vis the Treasury market.
15-Aug-11	Fixedated: August 8 - 12, 2011 Treasuries kept the party rolling as yields hit or neared multi-year lows. While S&P might say that U.S. Treasuries are no longer the safest best, the market apparently feels otherwise. Scorecard: Treasuries 1, S&P 0. Corporates felt the risk-off effect last week as HY touched its highest YTW since July 2010 while IG followed Treasury yields lower and hit its lowest YTW since October 2010. Munis received a reprieve last week as S&P confirmed that some municipalities could keep their AAA rating despite the U.S. downgrade.
12-Aug-11	GDP Monitor: Aug. 8 - 12, 2011 The FOMC statement caused a stir with the acknowledgment that short-term rates are not likely to increase until at least mid-2013. The more significant revelation, though, was that the Fed said temporary factors that had negatively impacted economic growth in the beginning of the year may not be the main problems faced by the economy today.
12-Aug-11	Data Detail: Retail Sales - July 2011 While the economic news following the second quarter advance GDP report has been depressing, July retail sales bucked the trend and showed the first solid improvement in economic conditions. Sales met positive expectations in July and, just as importantly, growth in June was revised higher. The consumer is not as weak as once thought.
11-Aug-11	Data Detail: Trade Balance - June 2011 With fiscal austerity taking hold across Europe and growth in Asia slowing -- specifically in China -- room for export growth is suddenly shrinking. Even a historically low dollar could not drive excess foreign demand. These conditions are expected to remain for the next few months, which do not bode well for a second half rebound.
08-Aug-11	Fixedated: August 1 - 5, 2011 The once unthinkable became reality this weekend as S&P downgraded the long-term debt rating of the U.S. to AA+. While the long-term impact is unknown, we believe this downgrade amounts to getting fired from a job you planned on quitting: the ego might be bruised, but life has not changed that much. For now, we continue to believe that Europe's debt issues are the more pressing matter. Corporates moved in opposite directions as anything with risk was deemed an investmenta non grata. AAA munis rallied right along with Treasuries last week as investors piled into investment grade debt. S&P's downgrade of the U.S. could lead to ratings changes for AAA-rated states and local municipalities over the long term.
05-Aug-11	U.S. Economic Outlook: Temporary Pain or Structural Calamity After muddling through the weakest two consecutive quarters since the recession ended, the big question is if the softness during the first half of the year was due to temporary problems caused by exogenous factors – elevated oil prices following the conflict in the Middle East and North Africa; parts shortages in the aftermath of the earthquake and tsunami in Japan; and uncertainties about new government regulations on banking and other industries – or by structural problems rooted in an over-indebted consumer and the ongoing aftermath of the financial crisis.
05-Aug-11	Data Detail: Employment Situation Report - July 2011 The improvement in the employment situation in July is a nice break from all of the poor economic news of late. It does not, however, signal a substantial change in the labor market recovery. The job gains were barely enough to cover labor force growth under normal economic conditions, and the U.S. is not in a normal environment.
04-Aug-11	Market Monitor: Where Underperformance Meets Activism Recognizing market timing never works as a long-term investment strategy, and with a current equity bias for large-cap multinationals, we developed a proprietary screen to examine which S&P 500 members underperformed the market in the five-year period ended July 29, 2011. The 37 equities returned in our screen reads like a who's who of companies that, despite poor share performance, still hold potential to deliver much better returns based on their strong brand power and/or global presence. If that does not happen soon, though, they also have the potential to get increased attention from activist shareholders.
03-Aug-11	A Debt and Deficit Attention Disorder The near-term problem of raising the U.S. debt ceiling has been resolved. The real problems – burgeoning U.S. debt levels and lackluster economic growth – are far from solved, however. The war over these issues has barely begun. With U.S. debt remaining a focal point for the market and the economy, today’s report – which will act as a primer for future pieces – will provide a basic understanding of the current state of U.S. federal debt obligations and explain how the situation developed.
02-Aug-11	Data Detail: Personal Income and Spending - June 2011 It seems that history is beginning to repeat itself. The lack of confidence in the economic recovery last summer resulted in three months of deteriorating consumer conditions that were highlighted by a spike in savings. That same evidence crept up in the June 2011 data.
01-Aug-11	Data Detail: ISM Index (July-11), Construction (June-11) A contraction in orders -- new and backlog -- led to a sharper-than-expected reduction in the ISM Manufacturing Index in July. Unless things pick up quickly in August, there is a real danger the index will reveal a contraction for the first time in two years. However, the Federal Reserve regional manufacturing surveys, which also show near-term weakness, expect the summer slowdown will be remedied by the end of the year.
01-Aug-11	Fixedated: July 25 - 29, 2011 Treasuries rallied last week despite the inability of U.S. lawmakers to approve a debt ceiling increase. Ironically, Treasuries have become their own safety trade. The formula seems to be: Soft Economic Data + Eurozone Debt Issues + Printing Press > Default Possibility + Potential Downgrade. Corporates performed well as cash-rich companies could benefit from sovereign struggles. At 2.88%, 10-year AAA munis are now yielding more than 100% of the 10-year U.S. Treasury.
29-Jul-11	GDP Monitor: Reconciliation with Q2 2011 GDP The annual revisions to the GDP data made forecasting the second quarter advance report a crapshoot. Still, it is hard to discount the fact that growth over the first half of the year was the slowest since the recession ended. The weakness also transpired during a time period when most economists believed the economy would produce stable, above potential growth for the entire year.
27-Jul-11	Trend Watch: July 11 - 22, 2011 The second quarter earnings reporting season is continuing the trend of upside EPS beats, with 72% of companies within the S&P 500 topping expectations. Perhaps helping companies is the fact that sell-side analysts over the past month lowered EPS expectations. A look at historical estimate data from 1985 to present indicates the lowered estimates are not warning signs, but rather estimate trends returning to normal. We discuss that point in this week's Trend Watch, along with other views including a potential intervention in the yen and the economic implications of declining drug prices. We also reiterate our stance for high-yield corporate debt.
27-Jul-11	Data Detail: Durable Goods Orders - June 2011 The durable goods report gives hope that GDP growth will return toward potential in the coming months. Manufacturers are not hunkering down and waiting for the recent weakness in the economy to pass. Instead, they are actively pursuing a business strategy that expects demand to resume in the near future.
26-Jul-11	Data Detail: Home Sales (June), Consumer Confidence (July) Consumer demand for new and existing homes weakened again in June as sales continued to fall. The underlying fundamentals in the economy are still not attractive for home buying. This includes increasing unemployment, declining incomes, and tight credit conditions. None of these bode well for a rebound in construction in the immediate future.
25-Jul-11	Fixedated: July 18 - 22, 2011 Treasury yields moved slightly higher as eurozone leaders increased fiscal support for Greece while U.S. lawmakers continued to debate the debt ceiling limit and a plan to reduce the deficit to no avail. The bigger picture for Treasuries though is that they could continue to show relative strength regardless of what happens. Corporates were mixed. HY outperformed IG as risky assets garnered more attention with near-term, doom-and-gloom scenarios evaporating. Munis kept a steady hand as a major issuance last week was well received.
22-Jul-11	GDP Monitor: July 18 - 22, 2011 As the second quarter wraps up, there are few signs that the "temporary" conditions blamed for the economic slowdown in the first half of the year will turn next quarter. If anything, the employment data suggest economic growth may be even softer over the next few months.
19-Jul-11	Data Detail: Housing Starts - June 2011 Using previous construction reports, project delays following severe weather conditions in April and May could be the main cause for the surge in housing starts in June. If growth was not based on increases in demand, it is likely that starts will not remain at this elevated level in July, and instead will return toward their three-month average of 575,000.
18-Jul-11	Fixedated: July 11 - 15, 2011 Treasuries held their ground on eurozone debt concerns even as the debt ceiling debate deteriorated. According to the yield curve and the demand at last week's auctions, the market appears to be regarding an increase in the debt ceiling as a given. While an outright crisis will likely be averted with a stop-gap measure, we believe that view is shortsighted. Corporates were mixed as IG rallied and HY was slightly weaker. The 10-year FactSet AAA muni hit 100% of the 10-yr UST at times last week.
15-Jul-11	GDP Monitor: July 11 - 15, 2011 Federal Reserve Chairman Bernanke continues to advocate that the economic weakness seen the last few months is the result of transitory, exogenous shocks. The data, though, have yet to turn in a fashion that would convince the market of the Fed's view. Economic growth may remain weak for another quarter.
15-Jul-11	Data Detail: Inflation, Industrial Production (June 2011) Even though price growth seems to be inching higher, year-over-year inflation rates still remain tame. Core consumer prices remain below the Federal Reserve's target rates. The inflation data do not suggest that the Fed will need to tighten its monetary policy anytime soon. It is a warning, however, that prices are beginning to increase even as the slack in the labor market expands.
14-Jul-11	Retail Sales - June 2011 The retail sales level came in surprisingly strong in June and not in-line with the weak underlying data from the motor vehicle sales and employment situation reports. Unfortunately, this may result in negative revisions to the data next month.
13-Jul-11	Trend Watch: June 27 - July 8, 2011 The second quarter earnings reporting season is upon us and our sense is that it could be a scattershot reporting period. Notably, the second quarter projected earnings growth rate for the S&P 500 Financials sector was 22.6% on March 31. Today, the financials sector is projected to report a 22.0% decline in second quarter earnings. The financials, therefore, seem ripe for a pop on better-than-expected results. The more telling response, though, will be how they perform in the wake of worse-than-expected results. We discuss that potential response in this week's Trend Watch, as well as other views including the outlook for China's CPI and high-yield versus investment-grade corporate debt.
12-Jul-11	Data Detail: Trade Balance - May 2011 A surge in petroleum demand drove the U.S. trade deficit in May to its highest point since October 2008. Surprisingly, the increase in petroleum demand came at a time when crude prices were falling and manufacturing growth was slowing. Normally, these two scenarios would lead to a decrease in petroleum demand.
11-Jul-11	Fixedated: July 5 - 8, 2011 Treasuries spent much of the week looking for direction and finally got it on Friday from a disappointing payrolls report. Both IG and HY corporates gained ground. However, the spread between the two indices has fallen 34 bps since June 24 as HY has outperformed IG by a wide margin. Munis had another steady week.
08-Jul-11	GDP Monitor: July 4 - 8, 2011 Hopes that economic growth will return to potential in the third quarter were dashed after June payroll data showed a second consecutive month of lackluster job gains. Even as elevated oil prices and Japanese supply pressures begin to ease, businesses and consumers remain uncertain about the future and have responded by cutting both costs and consumption. This is not a recipe for strong economic prosperity and could lead to idle growth for the rest of year.
08-Jul-11	Data Detail: Employment Situation Report - Juen 2011 The jobless claims data have consistently foretold weak payroll growth for the past three months. Yet, many economists, including those who reacted positively to Thursday’s much stronger-than-expected ADP report, continued to discount the underlying data in the seemingly futile hope that the claims report is overstating the sluggishness in the labor sector. With payrolls adding less than 50,000 jobs for the past two months, obviously that is not the case.
05-Jul-11	Fixedated: June 27 - July 1, 2011 Treasuries saw the bull turn into a bear last week as yields moved higher across the board. However, the 10-year yield is still about 50 bps below its early Feb. peak. The catalyst was the lowered risk of a default from Greece -- at least for now. All the auctions saw weak demand. Corporates were mixed as HY showed a strong gain while IG followed the reverse in Treasuries. Munis were also down, but showed some relative strength as the FactSet 10-year AAA Muni Index rose just 11 bps this week.
01-Jul-11	GDP Monitor: June 27 - July 1, 2011 Inflation, which has not reared its ugly head since 2008, has started to make a comeback. Higher prices have dented personal consumption growth in the second quarter. Fortunately, prices are already starting to subside and weak inflation rates should act as tailwind for growth next quarter.
01-Jul-11	Data Detail: ISM (June-11), Construction Spending (May-11) Manufacturing growth was surprisingly strong in June even though most of the regional manufacturing surveys suggested a deceleration in growth was a possible outcome. The lack of conformity between the national and regional surveys is unusual, and the hard data (industrial production and factory orders) tend to follow more closely with the consensus among regional surveys.
28-Jun-11	Data Detail: Consumer Confidence - June 2011 For the second consecutive month, consumer confidence tumbled as concerns about future employment opportunities and elevated gasoline prices weakened future expectations.
27-Jun-11	Data Detail: Personal Income and Spending - May 2011 While being delegated to the back burner for much of the post-recession expansion, inflation is beginning to flex its importance as real consumption fell for the second consecutive month. This is the first back-to-back real PCE decline since March and April 2009.
27-Jun-11	Fixedated: June 20 - 24, 2011 Treasuries recorded further gains last week as concerns about a U.S. economic slowdown and worries that Greece's debt situation will be bungled kept a foot on risk's throat. With the 10-year UST at 2.86% versus a forward earnings yield of 8.14%, we like the long-term risk-reward for equities. Corporates wavered during the week, but ultimately ended with a small gain for IG and a small loss for HY. Munis are the market's "Even Steven" as the FactSet 10-year AAA Muni Index has held at 2.86% for the last 7 sessions.
24-Jun-11	GDP Monitor: June 20 - 24, 2011 The durable goods data provided more evidence that the recent slowdown in manufacturing is transitory and not widespread. Yet, instead of gearing up for a better second half of the year, businesses continued to cut costs and increased layoffs. At this point, it seems unlikely that payroll gains will top 100,000 in June.
24-Jun-11	Data Detail: Durable Goods Orders - May 2011 With the exception of miscellaneous durable goods, orders in every other sector were positive in May and outperformed their levels in April. This type of widespread growth is at odds with the recent slowdown seen in the ISM reports but is in-line with the growth in industrial production. Despite the apparent weakness suggested by the declining ISM levels, the durable orders report suggests demand for manufacturing goods remains firm.
23-Jun-11	Data Detail: Home Sales - May 2011 While temporary factors -- including poor weather, high oil prices, and difficult financing conditions -- may have continued to play a role in poor sales levels, the uncertainty surrounding the economic recovery, along with no signs of stabilization in housing prices, are the main focal points for the current weakness in housing sales.
22-Jun-11	Trend Watch: June 6 - 17, 2011 Greece has been at the center of market conversations for several weeks now. Fittingly, it is at the center of this week's Trend Watch, which highlights one thing Greece has been good for in recent weeks and one thing that is hard to believe when considering the costs of the bailouts. In addition, this Trend Watch calls attention to a potential rescue plan for small business lending, the disconnect in household debt ratios, and both a possible and peculiar crowding-out effect in private-sector borrowing.
20-Jun-11	Fixedated: July 13 - 17, 2011 Treasuries rallied on new fears that Greece might be having difficulty dealing with its debt issues. Wait. Did we say new? We mean renewed. And by renewed, we mean there was no real new information about the situation at all. The real problems are not being addressed. Greece will still have a misfiring economy, a full-on blame game, and lax tax collection. Everybody join in...Second verse, same as the first. The spread between HY and IG corporates topped 300 bps for the first time in 2011.
17-Jun-11	GDP Monitor: June 13 - 17, 2011 Most economists believe the economic weakness in the first and second quarters is a temporary lull brought about by conservative planning and spending given the uncertainties introduced with the Japanese earthquake, rising gas prices, European sovereign debt problems, China's tightening efforts, questionable U.S. regulation extensions, and the U.S. deficit problem. However, we are concerned that so much blame for the recent economic woes is being placed on exogenous factors that economists are failing to look inwards and realize the problem may be structural instability in the U.S.
16-Jun-11	Data Detail: Housing Starts - May 2011 The positive surprise in housing starts in May masks a continued downtrend in the industry. The growth in starts was not enough to offset the level of completions, resulting in a continued downward trend in expected inventory levels over the coming months.
15-Jun-11	Data Detail: Industrial Production, Inflation (May 2011) The weakness perceived in the small gain in May industrial production is a clear case where the headline level is masking strong underlying details. The truth is, manufacturing -- which has looked soft in national and regional surveys -- remains on track for a healthy expansion in the second and third quarters.
15-Jun-11	The Fallacy of PIIGS Growth Prospects We have doubts that the PIIGS can successfully manage greater-than-potential GDP growth given that they have no control over monetary policy and are facing fiscal spending constraints. It is likely that debt-to-GDP levels will be higher than expected. Future bailouts should take into account that GDP growth may be substantially weaker than official and agency-based estimates. Otherwise, the bailouts will only postpone, not eliminate, an eventual default or restructuring.
14-Jun-11	Data Detail: Retail Sales - May 2011 For the first time since June 2010, retail sales fell on a monthly basis. Yet, the drop can be traced directly to elevated energy prices and a shortage in motor vehicle supply. Core sales, which follow a more stable trend, remained in the black for the fifth consecutive month.
13-Jun-11	Fixedated: June 6 - 10, 2011 Treasuries kept the rally hat on as the 10-year yield pushed lower on U.S. economic growth concerns and hope that the Fed will continue to support the bond market in one form or another. Buyer beware. Corporates were mixed as IG treaded water while HY sold off. The spread between the HY index and the 10-year UST crossed 400 bps (currently 414 bps) for the first time since January 5 and the spread between HY and IG has risen 72 bps since April 8. The 10-year FactSet AAA Muni Index was unchanged for the week.
10-Jun-11	GDP Monitor: June 6 - 10, 2011 The lack of Japanese-made motor vehicles and parts caused import growth to tumble in April, boosting the net export component to second quarter GDP. This is not sustainable growth. As automakers resume production over the coming months, pent-up demand will drive strong import growth. This will act as a significant headwind against GDP growth in the latter half of the year.
09-Jun-11	Data Detail: Trade Balance - April 2011 The negative effects of the Japanese earthquake and tsunami took hold in April and were one of the main drivers for the strengthening in the trade balance. The pullback in imports should only have a temporary effect on trade, and we anticipate import growth to surge as Japanese auto manufacturers and suppliers return to production.
08-Jun-11	Trend Watch: May 23 - June 3, 2011 Market participants are certainly showing some jitters regarding the current state of the economy, and that nervousness appears to be making the junk bond market a bit shaky. We have been of the opinion that participants should play volatile moves like this -- buying on weakness and selling on strength -- and see no reason right now to change that view. We discuss that opinion in this week's Trend Watch, as well as revisit the dislocation between available labor supply and hiring demand, explore the value-based investment opportunity vis-a-vis U.S. corporate bonds, and discuss the Chinese government's decision to write off local debt.
06-Jun-11	An Analytical Take on Right and Wrongs of the Dismal Science Using an analytical toolkit, we developed a proprietary Briefing Research Economic Surprise Index that explains when economic forecasting might be suffering from excessive exuberance or panic. This index will give us a way to signal when to expect abrupt changes in economic expectations.
06-Jun-11	Fixedated: May 30 - June 3, 2011 For the first time since December 2010, the 10-yr Treasury yield fell below 3.00%. Weak U.S. economic data and a rush to safety following more evidence that Greece will need a larger bailout were the main causes for the decline. Corporates were mixed as IG again trended flat while HY rose on weak data. Muni yields tightened slightly as safety traders continued to move into state and local government debt.
03-Jun-11	GDP Monitor: May 30 - June 3, 2011 In our first and second quarter Economic Outlook, we stated that the biggest risk to our medium-term forecast was an abrupt change in the labor market recovery. While we are hesitant to take one month of payroll data and extrapolate a trend, the initial claims level has been outside our "Recovery Zone" for four consecutive weeks and shows no signs of returning. The weakness in the claims data cannot be ignored or discounted any longer.
03-Jun-11	Data Detail: Employment Situation Report - May 2011 For the past month, the underlying fundamentals regarding the labor recovery have shown signs of stress. Most economists, including us, discounted poor initial claims readings as normal volatility following seasonal adjustment problems. This obviously was not simple volatility and was a definite precursor toward labor weakness.
01-Jun-11	Data Detail: ISM (May 2011), Construction (April 2011) The latest ISM report confirmed the views from the regional manufacturing surveys that the manufacturing sector expansion has slowed considerably nationwide. It is unknown if the deceleration is due to normal economic trends or if the supply disruptions from the earthquake and tsunami in Japan are to blame.
31-May-11	Data Detail: Consumer Confidence - May 2011 After reaching its highest level in three years in February (72.0), the Consumer Confidence Index is now at its lowest point since it reached 57.8 in November 2010. Higher oil prices seem to be the culprit.
31-May-11	Fixedated: May 23-27, 2011 Treasury yields headed south last week as increased concerns regarding the European debt crisis solution (or lack thereof) and weak U.S. economic data reinforced an already solid safety trade. Corporates were mixed as IG trended flat while HY showed a bit of weakness. Munis continued to stand firm as mass default concerns appear to have been put on the backburner by most participants.
27-May-11	GDP Monitor: May 23 - 27, 2011 After a relatively strong March, economic growth weakened across most sectors in April. As a result of the slowdown, we cut our second quarter GDP forecast nearly in half from its starting level. If the pullback is simply volatility following a strong March, our conservative forecast should increase over the next two months.
27-May-11	Data Detail: Personal Income and Spending - April 2011 Pricing pressures took their toll on consumption for the second consecutive month as higher oil and food prices mitigated just about all of the growth in personal spending in April.
25-May-11	Trend Watch: May 9 - 20, 2011 RealtyTrac recently estimated that banks currently possess more than 872,000 foreclosed properties while there are more than one million homes currently in the foreclosure process and possibly several million more that will enter it. As banks attempt to shed inventory, supply will continue to outstrip demand and will push prices lower. We discuss that point in this week's Trend Watch, along with other views including which cities one should rent versus buy a home, why talk of a second recession due to the flattening of the yield curve is premature, and how changing alcohol laws may benefit distributors.
25-May-11	Data Detail: Durable Goods Orders - April 2011 The demand for durable goods orders took a significant hit in April as orders from every sector, with the exception of computer and electronic products, declined on a month-to-month basis. Yet, the decline in orders followed a banner month in March. This suggests that the drop is not the start of a new trend but due to typical volatility in the data.
24-May-11	Data Detail: Housing Sales - April 2011 Considering the unexpected decline in existing home sales in April, the jump in new home sales was definitely a positive surprise. Yet, continued growth in new home sales may be difficult.
23-May-11	Fixedated: May 16 - 20, 2011 Treasuries ended the week nearly unchanged, but continue to be a favored play as the market grapples with "he-said-she-said" economic and earnings data. So long as U.S. economic growth is questionable, inflation remains muted, and the European debt crisis outcome stays muddled, there is little reason for participants to sell. Last week's corporate news can be summed up in two words: new issues. Munis stayed on their treadmill theme of grinding lower on limited supply.
20-May-11	GDP Monitor: May 16 - 20, 2011 The first data points in the second quarter from the housing sector were not very encouraging. Both sales and starts were below expectations. Even worse, April is technically the start of the home buying season. The lack of growth during this time is worrisome for both our short and long-term residential investment growth forecast.
18-May-11	Credit Check: Small Business Short on Sales, Credit Small businesses in the U.S. employ about half of all private sector employees and generate more than half of nonfarm private GDP. They require access to credit to survive, but small business lending has yet to rebound following the Great Recession. Nevertheless, the employment sector is rebounding and the U.S. economy has grown for seven consecutive quarters. New risks have arisen that could slow future economic growth, including higher oil/gasoline prices and a host of geopolitical concerns. At the same time, new signs of a rebound in small business lending have materialized.
17-May-11	Data Detail: Housing Starts, Ind. Production (April 2011) Builders continue to do their best at keeping incoming inventory levels at manageable levels by boosting and cutting back on production based upon changes in the number of new completions each month. This back-and-forth has caused a sawtooth pattern to develop in new home starts.
16-May-11	Fixedated: May 9 - 13, 2011 Treasuries are strong right now, but they are starting to resemble Charlie Sheen. "What debt ceiling? What deficit concern? Winning!" In all seriousness, the combination of tempered inflation expectations and relative safety appears to be a "winning" combination. At this point, there is no Ashton Kutcher to come to the rescue of investors. Corporates were mixed for the week as the HY Index YTW hit a fresh all-time low (6.68%). The FactSet AAA 10-year Muni Index is now at its lowest point since Nov. 14, 2010.
13-May-11	GDP Monitor: May 9 - 13, 2011 The first round of economic data from the second quarter was slightly below our expectations. While we tempered our forecast slightly, we believe our outlook remains conservative with a higher likelihood of upward revisions.
13-May-11	Data Detail: Inflation - April 2011 While the surge in food and gasoline prices was expected to keep headline inflation growth elevated, core price growth at both the consumer and producer levels was hotter than expected. Some media pundits have jumped on the growth in core prices as a sign of incoming inflationary pressures. Do not believe the hype.
12-May-11	Data Detail: Retail Sales - April 2011 For the past several months, gas and food prices have surged while income growth has remained relatively weak. The price/income tug-of-war hit a turning point in April as consumers slashed discretionary spending growth in order to maintain their gas and food purchases.
11-May-11	Trend Watch: April 25 - May 6, 2011 Global crude oil demand came in at 443,000 bpd below the EIA's projections in April. The real test will come on Memorial Day weekend. If pump prices fail to reflect the decline in oil prices, we could see demand destruction in retail gasoline consumption. We discuss that point in this week's Trend Watch, as well as revisit the current stretch for yield in the fixed income market, discuss the rising number of companies increasing/starting to pay a dividend, and review a number of economic data points.
11-May-11	Data Detail: Trade Balance - March 2011 The turmoil in the Middle East and North Africa -- which caused a surge in oil prices -- is directly to blame for the expansion in the trade deficit in March. Net petroleum imports increased from $25.5 bln in February to $31.3 bln in March. Excluding petroleum, the net export deficit actually declined from February levels.
10-May-11	U.S. Economic Outlook: A Return to Normalcy Signs of continued strength in the manufacturing sector combined with strong corporate earnings growth, increased business lending, and improved hiring activity should act as positive turning points for the U.S. economy as the remainder of 2011 unfolds.
09-May-11	Market Monitor: Taking Stock of Market Drivers We looked at monetary policy, fiscal policy, economic growth, inflation, earnings growth, valuation, and exogenous factors in an effort to gauge their influence on the U.S. equity market. Bullish, neutral, and bearish dispositions were represented across this spectrum, yet the balance of positions skewed to the bullish side when considering the U.S. equity market outlook.
09-May-11	Fixedated: May 2 - 6, 2011 Treasury yields continued to push lower on concerns the recovery is slowing down, as well as the "normal" overseas issues. Times are good for bonds, but as oil and silver proved last week, fortunes can turn on a dime. The IG corporate index hit its lowest YTW (4.19%) since November 30 and its spread to HY hit its widest level since March 24 last Thursday. The FactSet AAA 10-Year Muni Index breached the 3.00% level (2.99%) for the first time since December 6 as the flight to quality continues to overtake meager supply.
06-May-11	Data Detail: Employment Situation Report - April 2011 The employment situation improved markedly in April as private businesses added 268,000 jobs during the month, the most since November 2005. At the same, the number of unemployed workers also spiked, causing the unemployment rate to jump back to January levels. Normally these two measures move in lockstep, but the divergence in April adds a little uncertainty to an otherwise solid report.
05-May-11	So the Bond Guy Says to the Equity Guy.... All roads point to equities right now and specifically to U.S. blue chips with multi-national exposure, as they have more appealing total return potential than many bonds do -- government-issued or otherwise. Yes, this is a "bond guy" extolling the virtues of equities.
05-May-11	Data Detail: Initial Claims - April 24 - 30, 2011 In our March 3, 2011, report: "Expectations for Initial Claims," we stated that we would not be surprised to see the initial claims level reach 321,000 by the end of April. Instead of moving in a steady downward direction, claims have actually spiked to their highest level since August 2010. This is not the result, however, of a weaker labor market. The move can be completely explained by poor seasonal adjustment factors.
02-May-11	Data Detail: ISM Index (Apr-11), Construction (Mar-10) According to the April ISM report, the manufacturing sector saw a minor slowdown last month. Yet, almost all of the regional Federal Reserve manufacturing surveys pulled back significantly, suggesting a much greater slowdown than reported by the ISM. This discrepancy leads us to believe that the ISM Manufacturing Index may overstate the April industrial production data.
02-May-11	Fixedated: April 25 - 29, 2011 Treasuries rallied as the 10-year yield reached its lowest level in over a month. With no major events spurring the move, it is hard to argue that the recent rally is based solely on the safety trade. Last week's auctions saw some of the worst demand in the past twelve months. HY corporates continue to feel the love of the market as the ML HY Index hit an all-time YTW low of 6.69%. The 10-year AAA muni closed the week at its lowest yield (3.10%) since Dec. 13, 2010. Stocks, oil, gold, silver and bonds cannot all sustain continued, symbiotic rallies forever.
29-Apr-11	GDP Monitor: Reconciliation with Q1 2011 GDP After delving into the details of the first quarter GDP report, it is obvious that the BEA believed the March economic data were significantly stronger than January and February's levels. If the BEA is correct with its assessment, then the lull in economic activity that caused the slowdown in the first quarter has already passed.
27-Apr-11	Trend Watch: April 11 - 22, 2011 There has been a lot of chatter recently from media pundits and Congressional members saying inflation is getting out of hand. In this week's Trend Watch, we show why that view is more hype than reality. We also question whether the current stretch for yield in the fixed income market means relative safety is the new relative value, and provide our view on how a recovery in home prices may not be as swift as a recovery in the labor market.
27-Apr-11	Data Detail: Durable Goods Orders - March 2011 After an originally underwhelming February report, the March Durable Goods Orders report revealed upward revisions to February's data and manufacturing demand posted solid growth in March. These levels easily surpassed expectations and suggest that the manufacturing sector remains on firm ground. Separately, our first quarter GDP growth outlook improved following the last two economic releases of the quarter. We revised our Q1 2011 GDP growth forecast from 0.1% to 0.5%.
26-Apr-11	Data Detail: Consumer Confidence - April 2011 Consumer confidence improved in April as concerns about high gasoline prices, which weighed heavily on the minds of consumers in March, eased slightly. This is not to suggest that high gasoline prices are not worrisome. To the contrary, another sharp uptick in oil prices will probably send confidence tumbling again.
25-Apr-11	Data Detail: Home Sales - March 2011 The size of the distressed property market continues to hinder a breakout in new home sales. Even though new home sales rebounded in March, investors scoured the distressed listings in the existing home market. Thus, existing home prices were driven further down and are causing the new home premium to reach historical highs.
25-Apr-11	Fixedated: April 18 - 21, 2011 Treasuries ended the week pretty much where they began as the market was able to shrug off the warning from S&P. After narrowly avoiding a government shutdown, the debt-ceiling debate will be accompanied by more grandstanding than a WrestleMania event. Corporates were mixed, but HY has shown more strength as the ML US HY Mstr II Index is now just 2 bps from its all-time low. The FactSet 10-year AAA Muni now sits at 3.18% -- a level not seen since December 31. We also pose the question, a 10% return for investing in a blue chip company... or 8.75% to fund a dividend payment for a highly leveraged company?
21-Apr-11	GDP Monitor: April 18 - 21, 2011 The data released this week had little effect on our first quarter real GDP forecast. The economy experienced a significant slowdown in the first quarter, and we are becoming slightly concerned that the sluggishness may carry over into the second quarter.
20-Apr-11	A Fool's Mission: Keeping New Home Premiums High The housing sector has its share of well-documented problems, including oversupply, falling prices, and a lack of credit. Another wrinkle has developed that could potentially cause homebuilders to see a worsening in selling conditions. The new home premium -- the difference in price between a new home and an existing home -- has gotten so far out of line that new homes are in danger of no longer being competitive for a potential home buyer.
19-Apr-11	Data Detail: Housing Starts - March 2011 Housing starts have shown significant volatility over the past few months as homebuilders attempt to maintain a low level of inventory growth. Starts continue to be paced by the number of completions, as builders wait for demand to pick up before starting a construction binge.
18-Apr-11	Fixedated: April 11 - 15, 2011 Treasury yields ended the week lower as the safety factor took center stage. Unresolved issues in the MENA region, Japan's struggles, more restructuring rumors for the PIIGS and inflation concerns in Germany and China have issues in the U.S. looking not so bad to some. Corporates were mixed as IG rallied with Treasuries and HY essentially trended flat. Munis held their own as a lack of high-grade supply helped the 10-year FactSet AAA yield grind a bit lower. We believe there are still relative values to be had in the AA-rated area as two noteworthy issuers placed 10-year paper last week at 4.00%.
15-Apr-11	GDP Monitor: April 11 - 15, 2011 At the beginning of the quarter, we were confident that GDP would remain above 3.0% for the foreseeable future. Yet, that forecast was deemed weak by the majority of economists in the consensus. Since that time, the economic data has turned sluggish and we have cut our forecast accordingly. So far, the consensus remains unwilling to do the same.
15-Apr-11	Data Detail: Industrial Production, Inflation (March-11) Manufacturing production continued to grow at an accelerated pace in March, but that pace may soften in the coming months. High oil prices and a slowdown in the demand for trucks should cause motor vehicle manufacturers to pull back on production.
13-Apr-11	Trend Watch: March 28 - April 8, 2011 The near- and long-term fundamentals remain very constructive for corn, even as prices accelerated to a new all-time high of $7.8375 per bushel on April 11. We discuss that point in this week's Trend Watch, along with other views including why silver has outperformed gold, how high-yield debt might be getting rich again, how the U.S. can maintain high manufacturing wages and still compete in the global economy, and how public health-care reform fixes only part of the problem.
13-Apr-11	Data Detail: Retail Sales - March 2011 At first glance, the weaker sales growth in March looks worrying, especially in the face of deteriorating consumer confidence and higher gasoline prices. However, the details suggest that sales in March were actually solid and should remain firm for the foreseeable future
12-Apr-11	Data Detail: Trade Balance - February 2011 The surge in oil prices in February was not enough to bolster demand for imports as the trade deficit narrowed in February. Unfortunately, the contraction in the deficit does not look to be the start of a new trend. The latest ISM level suggests that manufacturing demand remains strong, and demand for oil products should return in March.
11-Apr-11	Market Monitor: A Value Line Our view that there is relative value in the U.S. equity market remains unchanged. By extension, there must be relative value in individual stocks which comprise the equity market. This research note highlights some possible value-based investment ideas, using return on capital as a lead screening parameter and the 2003-2007 bull market as a basis for comparison.
11-Apr-11	Fixedated: April 4 - 8, 2011 Treasury yields ended the week markedly higher as the "risk on" mantra took hold and issues overseas started to become part of the "normal" state of things. With a new budget in place, the market can shift its focus to inflation concerns, the looming battle over increasing the debt ceiling, and the start of earnings season. Corporates were mixed as HY outperformed IG. The ML U.S. HY Mstr II Index YTW is now just 8 bps from its all-time low set on Feb. 21, 2011. Munis were off just a bit last week. A few good-sized deals this week may provide some of the price transparency the market has been seeking.
08-Apr-11	GDP Monitor: April 4 - 8, 2011 The deceleration in first quarter GDP is a temporary lull in growth. As payrolls continue to expand, aggregate income growth should be enough to push GDP back toward potential (2.7% - 3.0%) next quarter. However, some of the downside risks to our forecast are becoming more probable.
04-Apr-11	Fixedated: March 28 - April 1, 2011 Treasury yields rallied on Friday to end the week largely unchanged. Last week's auctions were greeted with a collective yawn by participants as the 2-, 5-, and 7-year sales were each met with tepid demand. The results were yet another reason for us to believe that there is not much support for Treasuries at current yields. Corporates were weaker across the board as the ML U.S. HY Mstr II Index rose above 7.00% for the first time in nearly two months. Munis are still holding their ground as supply remains extremely low.
01-Apr-11	GDP Monitor: March 28 - April 1, 2011 It seems that every data point released over the last few weeks has regressed from previous levels. This week, it was the construction sector's turn to showcase its continued contraction and the drag that is putting on current economic output. While we still believe the deceleration in first quarter GDP is a temporary lull in growth, incoming data keep confirming a deceleration in activity across multiple sectors.
01-Apr-11	Data Detail: Employment, ISM (Mar-11), Construction (Feb-11) It was hard to find fault with any of the data from the March Employment Situation Report. The labor sector improved in just about every area and the growth in aggregate hours is sufficient to drive consumption growth higher in the near future.
30-Mar-11	Trend Watch: March 14 - 25, 2011 It is abundantly clear in the consensus earnings estimate trend that analysts are not abundantly worried that what is going on in China, Japan, Europe, or the MENA region is going to have a material impact on earnings prospects. We discuss that point in this week's Trend Watch, along with other views including one possible reason for subdued consumption growth in the first quarter, a discussion on U.S. airlines rethinking their fuel hedges, and the potential March Madness effect on Las Vegas.
29-Mar-11	Data Detail: Consumer Confidence - March 2011 The consumer confidence and sentiment indices both saw substantial declines in March as consumers worried about the negative effects of the recent spike in oil and gasoline prices. Confidence/sentiment should remain weak until gasoline prices fall back to more normal levels.
28-Mar-11	Data Detail: Personal Income and Spending - February 2011 Last quarter, personal consumption spending jumped 4.0% and helped lead GDP to an above potential (2.7% - 3.0%) growth rate. We expected consumption spending would continue growing near its fourth quarter rate in the first quarter. After two months of data, that growth projection turned out to be too optimistic.
28-Mar-11	Fixedated: March 21 - 25, 2011 Treasury yields ended the week higher as the news overseas failed to get markedly worse. With conditions in Japan and the MENA region not worsening -- and Europe's issues become part of the daily "norm" -- this week's auctions are unlikely to reverse the trend of rising yields. However, higher yields could at least equate to good demand. Corporates were mixed once again. The spread between the ML U.S High Yield Master II Index and the ML U.S. Corporate 7-10-year "A" Index has fallen 34 bps in 8 trading sessions. Munis were slightly weaker, but continue to hold their ground on light supply.
25-Mar-11	GDP Monitor: March 21 - 25, 2011 The growth outlook for Q1 2011 was lowered again this week as the economic numbers have not rebounded following the weakness experienced in January. While growth in the next few quarters should return toward potential, the uneasiness in the data - especially in the housing market - is starting to concern us that our 2011 forecast may be too strong.
24-Mar-11	Data Detail: Durable Goods Orders - February 2011 For the first time since Q4 2009, durable goods orders excluding transportation did not post positive growth in the second month of the quarter. While this bears watching to see if a negative trend develops, the drop is likely just noise.
23-Mar-11	Data Detail: Home Sales - February 2011 Unfortunately, both the new and existing home sectors saw notable declines in February. The drop in existing home sales is likely a temporary correction after three months of gains as affordability conditions remain near all-time highs. The future in the new home sector, on the other hand, looks grim as prices remain uncompetitive compared to existing homes.
22-Mar-11	Where are the Qualified Workers? Given the sheer size of the unemployment pool, one would think that businesses would have an easy time finding qualified workers. That is not the case. The reality is that firms have been steadily increasing the number of job openings, but have been unable to find qualified workers to fill them.
21-Mar-11	Fixedated: March 14 - 18, 2011 Last week was filled with tension and uncertainty as Japan and Libya continued to dominate the market's focus. The 10-year is being surprisingly sticky around the 3.30% level in the face of a resilient equity market. Corporates were mixed and the YTW spread between the ML U.S. HY Mst II Index and the ML U.S. Corp 7-10-yr "A" Index hit its widest level since January 11. The FactSet 10-yr AAA Muni Index yield headed lower as top-quality munis benefited from the flight-to-safety and continued limited new supply.
18-Mar-11	GDP Monitor: March 14 - 18, 2011 We cut our GDP growth forecast for the first quarter again this month, yet the revision had more to do with factors other than the economic data itself.
17-Mar-11	Industry Perspective: Japan's Import/Export Markets Japan is the world's third largest economy, the fourth largest exporter and the fifth largest importer. Accordingly, the effects of the Tohoku Pacific Earthquake and tsunami will have a significant impact on certain industries, though the likely effect will be indirect. We look at Japan from an industry perspective to assess its share of global import and export markets.
17-Mar-11	Data Detail: Inflation, Industrial Production (Feb-11) While headline inflation growth may seem potentially worrisome, it follows exactly what the Fed has been talking about the past few months. Food and energy prices are spiking on transitory shocks and underlying price growth remains minimal. There is nothing in the data that suggests the Fed will have to change its policy to combat higher inflation.
16-Mar-11	Trend Watch: Feb. 28 - March 11, 2011 The Treasury market has benefitted from a flight-to-safety trade in the wake of unsettling geopolitical events. Still, there are signs that flight-to-safety trade is at a lower altitude than years past. We discuss that point in this week's Trend Watch, along with other views including insight on the price of gasoline, a solution for cutting the budget deficit, and the potential for social unrest in Mexico.
16-Mar-11	Data Detail: Housing Starts - February 2011 Poor winter weather, or a strategy to continue to reduce home construction, is being blamed for the worst home starts level since April 2009. Unfortunately for residential construction, the drop is probably the result of a combination of the two.
14-Mar-11	Fixedated: March 7 - 11, 2011 Treasuries took a wild ride as MENA unrest and the disaster in Japan outweighed Bill Gross's announcement that he is out of the Treasury market and decent economic numbers. Europe's debt issues are being pushed off the front page again even as major changes are afoot. Corporates were mixed as HY showed some weakness and IG piggybacked on the strength in Treasuries. Muni yields continued to slowly trend lower.
11-Mar-11	Market Monitor: Change Happens - Part II There is a lot of attention right now on news items with a negative orientation, so much so that the potential for positive changes and the relative value that exists in the equity market have gotten lost in the mix. We examine what can still go right to keep the bull market on track.
11-Mar-11	GDP Monitor: March 7 - 11, 2011 External events in the MENA region and Europe are set to have a profound impact on our long-term trade outlook. It is not possible to know exactly how these two shocks will play out, but in the near-term, the net export deficit has switched from being a strong positive contributor to growth in Q4 2010 to an equally strong negative contributor in Q1 2011.
11-Mar-11	Data Detail: Retail Sales - February 2011 It seems that the snowstorms that were blamed for the weaker-than-expected economic data in January were milder than previously thought. The retail sales report is the latest to show significant upward revisions to January data, confirming that consumer demand is not slowing down.
10-Mar-11	Data Detail: Trade Balance - January 2011 The January trade report is a perfect example of why perceiving the widening of the trade deficit as a negative to GDP growth neglects the underlying strength of the U.S. domestic economic engine.
07-Mar-11	Fixedated: Feb. 28 - March 4, 2011 Treasury yields moved higher last week, but saw some wide swings as good economic data battled with MENA headlines and the oil rally for dominance. Oil prices may be saying that there is still a substantial amount of risk to be accounted for, but the bond market appears to be saying that the good economic data outweigh the tenuous state of the MENA region. Corporates were mixed as HY gained some ground while IG backed off a bit. Munis were stable moving in a range of just a couple of bps.
04-Mar-11	GDP Monitor: Feb. 28 - March 4, 2011 The snowstorms in January seemed to have a profound effect on economic activities throughout the month. Most of the "lost" growth should return in February. So far this has been confirmed with stronger-than-expected motor vehicle sales and payrolls. We have accounted for conservative rebounds in most sectors and believe 3% growth in the first quarter remains realistic.
04-Mar-11	Data Detail - Employment Report - February 2011 The February Employment Situation Report beat consensus expectations with a dip in the unemployment rate and strong nonfarm payroll gains. Yet, wage growth remains flat 20 months into the recovery and could negatively affect consumer spending.
03-Mar-11	Expectations for Initial Claims We expect the initial claims level to move toward 321,000, its average in 2007, at a fairly rapid pace and to follow the trends from the previous expansions. We would not be surprised if initial claims reach this level before the end of April.
03-Mar-11	Institutional Long Equity Allocation -- Q4 2010 Institutional investors in aggregate made modest changes to their long equity allocation in Q4 2010 relative to the S&P 1500. Money flowed out of fixed income ETFs and into domestic equity, international equity and commodity ETFs. As a percentage of beginning quarterly assets, more money flowed into domestic equities than international equities, commodities and fixed income.
02-Mar-11	Trend Watch: Feb. 14 - 25, 2011 In this Trend Watch, we: Deflate stagflation concerns -- the current growth rate for CPI is 1.6% y/y and the six-month moving average for the diffusion index sits at 59.0, which compares to averages of 8.7% and 72.8 during the stagflation years of 1973-82. Suggest the multiplier effect from the payroll tax cut many economists counted on in raising their 2011 GDP forecasts will not be as strong as they originally thought. Discuss China's expanding purchases in the U.S. Treasury market, the only one big enough to meet the country's investment demand.
01-Mar-11	Data Detail: Construction Spending (Jan-11), ISM (Feb-11) Without strong growth in home improvement projects, total construction spending would have declined 2.6% in January. We do not believe home improvement demand can continue growing at this level. Unless nonresidential construction demand picks up considerably, this means total construction spending will probably fall again in February.
28-Feb-11	Data Detail: Personal Income and Spending - January 2011 The January Personal Income and Spending report was a mixed bag. Income growth was higher than expected while spending growth was less than expected. Core inflation remain subdued, up just 0.8% year-over-year and providing the Federal Reserve little reason to take its foot off the QE2 accelerator prematurely. With real disposable income up 0.4% and the personal savings rate increasing from 5.4% to 5.8%, the potential is there for personal spending to pick up further in February.
28-Feb-11	Fixedated: Feb. 22 - 25, 2011 Treasuries benefited from the safety trade last week. However, we question the conviction behind this move as overall interest at last week's auctions was tepid at best. Corporates were mixed as HY gave up some recent ground after touching yet another all-time YTW low while IG bond yields headed lower. Munis continued to regain lost ground as the FactSet AAA 10-year Muni Index yield has fallen 20 bps since February 11.
25-Feb-11	GDP Monitor: Feb. 21 - 25, 2011 The economic data released this week tracked closely with our expectations. Furthermore, the negative revisions to Q4 2010 GDP growth had no effect on our outlook. Economic growth should remain slightly above 3% for the remainder of 2011.
24-Feb-11	Data Detail: Claims (Feb. 19), Durables, Home Sales (Jan-11) Since October 2009, durable goods orders excluding transportation have followed an unusual trend where orders fall during the first month of the quarter and then grow and more than make up for the decline during the subsequent two months. This pattern seems to have remained intact in Q1 2011.
22-Feb-11	Data Detail: Consumer Confidence - February 2011 The Conference Board's Consumer Confidence Index reached its highest level since February 2008 this month, but continued growth may become strained as unrest in the Middle East and North Africa puts upward pressures on oil prices.
22-Feb-11	Fixedated: Feb. 14 - 18, 2011 Treasuries saw a tight trading range last week as inflation concerns were balanced out by geopolitical tensions. While we would not consider the Treasury market to be in a bubble, it is starting to make us feel like we are watching a rubber band being stretched back and forth. A rubber band can still snap back with considerable speed well before it reaches its breaking point. Both HY and IG corporates gained last week, but HY stole the show as the ML U.S. HY Mstr II Index touched all time lows for YTW and YTM at 6.77% and 7.29%, respectively. The 10-year FactSet AAA Muni Index is now at its lowest level since Jan. 11, 2011.
18-Feb-11	GDP Monitor: Feb. 14 - 18, 2011 The data released this week gave us our first glimpse of economic growth in first quarter. So far, the data is consistent with our 2011 economic forecast that we released earlier in the week. Led by gains in consumption, GDP should increase slightly above 3.0% for the remainder of the year.
17-Feb-11	Data Detail: Jobless Claims (Feb. 12), Inflation (Jan-11) We believed that snowstorms that affected much of the Midwest and Northeast in the beginning of February may have biased the February 5 data. According to the latest report, however, the snowstorms played no role in the decline. The fall in claims was completely due to normal business layoff behavior.
16-Feb-11	Trend Watch -- Jan. 31 - Feb. 11, 2011 What is on the other side of QE2 in June? Is the market ready for the Fed's exit? In this Trend Watch, we ponder those questions while also providing another perspective on the impact of owners' equivalent rent on inflation and discussing continued consumer deleveraging.
16-Feb-11	Data Detail: Housing Starts, Industrial Production (Jan-11) At first glance, the housing starts data suggest that homebuilders' confidence returned in January as the number of starts increased to its highest point in four months. However, hidden in the details, homebuilders actually believe demand for new homes remains weak and new starts are simply replacing completed ones.
15-Feb-11	U.S. Economic Outlook - Closing the Output Gap We expect the U.S. economy to expand by 3.1% in 2011, led by a solid increase in consumer spending and a modest pickup in business investment. The second half of the year will be notably stronger than the first half as accounting measures push a small rebound in construction spending into the third and fourth quarter. GDP growth in 2012 is expected to increase to 3.5% as hiring prospects continue to grow and investment demand picks up steam.
15-Feb-11	Data Detail: Retail Sales - January 2011 A look at the headline retail sales level would suggest that winter weather conditions played a significant role in reducing consumption in January and, as a result, our consumption outlook for the quarter may look too strong. Those viewpoints, however, discount typical consumer behavior. The sales that were lost in January should come back in February, leaving our consumption forecast intact.
14-Feb-11	Fixedated: Feb. 7 - 11, 2011 Treasuries ended the week fairly flat as a holding pattern seems to have formed as the market waits for unrest in the Middle East to play out. There has been some commentary that the lack of a bigger Treasury rally in the face of the developments in Egypt could mean that participants have reassessed the "safety" of Treasuries. We think that is jumping the gun a bit. Corporate yields were slightly lower for the week as the ML HY Index came within 9 bps of its all-time YTW low on Wednesday. Munis moved sideways and seem to have found a new trading range after the recent selloff.
11-Feb-11	Data Detail: Trade Balance - December 2010 The expansion in the manufacturing sector was behind the widening of the December trade deficit. It did not widen as much as expected, however, which should result in positive revisions to Q4 2010 GDP. What is more, the expansion in manufacturing should lead to accelerated growth in Q1 2011.
10-Feb-11	Data Detail: Jobless Claims - Jan. 29 - Feb. 5, 2011 The initial claims level has now reached its lowest point since July 2008. At first glance, this would suggest the initial claims level does not have much farther to decline before we see a substantial increase in payrolls. However, the drop may be too good to be true. It is possible that the decline is only a temporary reduction from snowstorms that affected much of the Midwest and Northeast in February.
08-Feb-11	Market Monitor: Change Happens - Part I The stock market's linear performance path, which has taken the S&P 500 up 26% since the end of August 2010, raises questions about what could go wrong. In this note, we examine possible changes at the margin that need to be respected as changes that could alter the investment outlook and, more importantly, the confidence in the fundamental forces needed to drive a sustained recovery.
07-Feb-11	Fixedated: Jan. 31 - Feb. 4, 2011 Treasuries took a fairly big hit on the long end of the curve as the belief in the economic recovery is raising the specter of inflation again. As questions linger concerning China's property market, the Middle East and the unresolved European debt situation, it is too early to say that we will not see another leg down in yields. HY corporates continue to do well as the ML US HY Mstr II Index YTW held near its lowest yield since March 2005. However, IG bonds followed Treasury yields higher as the ML U.S. Corp 7-10-Yr A Index hit its highest yield since Dec. 15, 2010. The spread between the two is at its lowest level since July 2007.
04-Feb-11	GDP Monitor: Jan 31 - Feb. 4, 2011 We expect GDP growth of 3.1% in the first quarter, slightly ahead of potential (2.7% - 3.0%), as broad swathes of the economy continue to expand.
04-Feb-11	Data Detail: Employment Situation Report - January 2011 Inclement weather conditions and annual population adjustments combined to cause confusion over the January Employment Situation report. The numbers, by themselves, suggested a deteriorating labor sector. However, after factoring out the statistical and seasonal problems, the trend from the labor sector was actually consistent with recent developments.
03-Feb-11	Trend Watch: Jan. 17 - 28, 2011 In this Trend Watch, we discuss the breakeven trade and inflation, equity outperformers underperforming in 2011, the attractiveness of BP bonds, and the widening spread between two crude oil benchmarks.
03-Feb-11	Data Detail: Jobless Claims - Jan. 23 - 29, 2011 As expected, the surge in the initial claims level for the week ending January 22 was a one-time event and claims quickly returned to their pre-disruption level. While the problem has already dissipated, it may have some effects on tomorrow's January payroll data.
01-Feb-11	Data Detail: ISM (Jan-11), Construction Spending (Dec-10) Last month, the ISM Manufacturing Index barely increased even though many of the regional Federal Reserve surveys showed activity at the highest level in years. At the time, we believed that the ISM index may be under representing actual manufacturing production. It seems the data reversed in January, and the industrial production and shipments data could be weaker than the ISM level suggests.
31-Jan-11	Data Detail: Personal Income and Spending - December 2010 The final monthly personal income and spending report of the quarter is known prior to its release and generally has no new information about how the economy is performing. However, December's report did give us some insight into damages the construction industry may have sustained from snowstorms.
31-Jan-11	Fixedated: Jan. 24 - 28, 2011 Treasuries remained range bound last week as the 10-year failed to break out of its 2011 range of 3.29% - 3.49%. HY debt may be getting ahead of itself. The ML US HY Mstr II Index's YTW is at its lowest level (7.01%) since March 2005 and is nearing its all-time low of 6.81% from Dec. 15, 2004. Limited muni supplies appear to be balancing out any fear-based selling supported by questionable default concerns. With no major auctions scheduled for the week, the market will be focused on earnings, Friday's employment report, and the unrest in Egypt.
28-Jan-11	GDP Monitor - Reconciliation with Q4 2010 GDP Instead of withering against the brunt of an inventory slowdown, the economy boomed. Real final sales, which exclude inventory changes, jumped 7.1% and saw its fastest quarterly increase since Q2 1984. Growth was widespread and did not rely on any single sector or stimulus measure.
27-Jan-11	Data Detail: Durables (Dec-10), Jobless Claims (Jan. 22) Shipments of nondefense capital goods excluding aircraft and durable goods inventories came in stronger than we expected. As a result, we revised higher our GDP estimate from 3.4% to 3.8%, which is more in-line with consensus expectations.
26-Jan-11	Data Detail: Home Sales - December 2010 Sales of both existing and new homes were stronger than expected in December. The key takeaway is that the new home sales report justified the expansion in private residential construction over the past several months.
25-Jan-11	Data Detail: Consumer Confidence - January 2011 Last month, we did not describe the unexpected drop in the Consumer Confidence Index as "the start of a new trend" or say "a weakness is developing within the consumer." The January data confirmed our view as the confidence index rebounded back to May 2010 highs.
24-Jan-11	Fixedated: Jan. 17 - 21, 2011 Treasury yields ended the week higher across the board, but the overall tone in the market is one of hesitation. High-yield corporates once again managed to outperform their investment-grade counterparts. Munis continued to see some headline pressure, but that has been partially relieved by crossover buyers opting for higher-yielding AAA munis over Treasuries.
21-Jan-11	GDP Monitor: Jan. 17 - 21, 2011 For the first time in a long time, economic growth in the U.S. was broad-based and lacked any one-off factors that seemed to explain economic growth in pervious quarters. Almost every sector showed positive gains driven by normal economic conditions. Given the strength in the overall data, we feel that growth in excess of 3.0% should be the norm in 2011.
20-Jan-11	Trend Watch: Jan. 3 - 14, 2011 In this Trend Watch, we debate whether the U.S. deficit is an immediate problem, discuss mortgage servicers walking away from properties, and compare the U.S. and Chinese equity markets.
20-Jan-11	Data Detail: Jobless Claims - Jan. 9 - 15, 2011 There is no question that the labor sector is recovering. After three weeks of unreliable data, the initial claims level once again settled below the upper bound (410,000) of our "Recovery Zone." This level is conducive of stable payroll gains in excess of 100,000 per month.
19-Jan-11	Data Detail: Housing Starts - December 2010 Homebuilders and consumers have been playing a very dangerous game of chicken over the past few months. On one side, builders ramped up production, especially in the single-family sector. On the other, sales demand has steadily but slowly risen from post tax credit lows. Both sides could not continue moving at their current pace without inventory problems causing another price disruption.
18-Jan-11	Fixedated: Jan. 10 - 14, 2011 Treasuries had another volatile week as the 10-year swung about 20 bps between its high and low yield before ending the week where it started. Corporate high-yield debt has vastly outperformed high-grade debt since November 30. Munis are seeing their highest yields in two years while Illinois fired the first state income tax shot.
14-Jan-11	GDP Monitor: Jan. 10 - 14, 2011 Economic data continue to show improvement for the economic recovery. Even though our fourth quarter forecast dipped from 4.0% last week to 3.5% this week, it was due to new inventory data. The final sales numbers continued to strengthen and show broad-based growth.
14-Jan-11	Data Detail: Inflation, Retail Sales, Production (Dec-10) As long as income growth remains subdued, rising commodity prices will have only a limited effect on increasing inflation. What may not be realized is that this is not just a consumer versus producer phenomenon.
13-Jan-11	Data Detail: Jobless Claims (Jan 8), Trade Balance (Nov-10) Even though initial claims rose to their highest level since October, this week's data should not be looked upon as an inflection point where weaker employment numbers become the norm. On the contrary, it is most likely that this was a one-time surge that should dissipate in the very near future.
10-Jan-11	Fixedated: Jan. 3 - 7, 2011 Treasury yields saw a sharp, mid-week rise, but fought back to end the week mostly flat to slightly higher. The exception was the 30-year which held near the top of its 8-month yield range. Corporates were mixed again. After touching a 7.87% yield on Nov. 30, 2010, the ML US HY Mstr II Index has rallied 58 bps to 7.29%. The Factset AAA Muni 10-year Index reached its highest level since April 2010. This week, the focus will be on European debt auctions. Germany's sale is actually the one with the most potential to unsettle the market.
10-Jan-11	GDP Monitor: Jan. 3 - 7, 2011 While we hesitate to utilize business surveys as a forecasting tool, it is hard to deny the substantial strength in both the ISM Manufacturing and Non-Manufacturing indices over the past few months. Yet, these data points are not alone. Many economic data points show the economic recovery is picking up steam.
07-Jan-11	Data Detail: Employment Situation - December 2010 The prevailing message in the December employment report is clear and familiar: labor trends are improving, but not at a fast enough pace for the Federal Reserve to take its foot off the quantitative easing pedal.
05-Jan-11	Trend Watch: Dec. 20 - 31, 2010 In this Trend Watch, we debunk one explanation for the rapid rise in Treasury yields, discuss floating-rate notes, present a new manufacturing index, and discuss the repercussions in the coal market following flooding in Australia's export region.
03-Jan-11	Data Detail: ISM (Dec 10), Construction Spending (Nov 10) While the ISM index barely grew in December, many of the regional Fed surveys showed activity at the highest level in years. Economically-speaking then, the ISM index may be under representing actual manufacturing production, which suggests the industrial production and shipments data could be better than expected.
03-Jan-11	Fixedated: Dec. 27 - 31, 2010 Treasuries continued their manic behavior last week as the 10- and-30-year bonds swung 30 and 22 bps, respectively, before yields closed 8 and 12 bps lower. Last week's Treasury auctions were a mixed bag of surprisingly strong, disappointing, and trend-typical. Investment-grade corporates finally managed to outperform high-yield debt for the first time since late Nov. Munis moved sideways as the 10-year AAA muni held at 3.16% for the week.

24-May-12	Data Detail: Durable Goods Orders - April 2012 Relative to expectations, the durable goods orders report for April was a mixed bag. Still, the second straight month of declines in orders for nondefense capital goods excluding aircraft -- a proxy for business investment -- will mesh with concerns that the macro uncertainty is driving a slowdown in business investment that could persist.
23-May-12	Trend Watch: May 7 - 18, 2012 The downturn in May has been fueled by the festering debt crisis in Europe, concerns about slowing economic activity in China, worries about sluggish job growth in the U.S., and a stunning revelation of a huge trading loss at JPMorgan Chase. In brief, there has been a confluence of factors that has raised the level of uncertainty for market participants who have been inclined to sell first and ask questions later. We discuss these factors in this week's Trend Watch, including: A new, more pessimistic view on the survivability of the eurozone Why the Federal Reserve's economic outlook is too bullish How we remain hesitant to initiate positions in corporate bonds A reaffirmation of our long-term view on natural gas, even as it has rallied in the face of a pullback in commodities
23-May-12	Data Detail: Home Sales - April 2012 A lack of available distressed properties tempered growth of existing home sales for a second consecutive month as investors waited on the sidelines for more bank-owned properties to come to the market. That same lack of inventories, however, bolstered new home sales by reducing the premium paid for a new home versus an existing home.
21-May-12	Fixedated: May 14 - 18, 2012 Treasury prices soared to new heights as the yield on the 10-year hit an all-time low of 1.69% (overnight) last Thursday. Germany’s parental stance regarding Greece’s need to take its medicine may be weakening. There appears to be a growing belief among other members that the long-term solution may lie in the issuance of group-backed euro bonds. Corporates took a hit last week with yields on the investment-grade and high-yield indices rising 13 bps and 45 bps, respectively. Munis continue to be a compelling relative value trade vs. USTs as the percentage of relationship for 10-year AAA debt stands at 127%.
18-May-12	GDP Monitor: May 14 - 18, 2012 After years of negatively contributing toward GDP, we feel comfortable stating that the residential construction sector has bottomed and will help contribute positively to economic output for the foreseeable future. The number of homes under construction has been on a steady upward trend since August 2011 and inventory levels are at all-time lows. Builders will have to continue adding to new production even if sales growth is at a minimum.
18-May-12	Dividends and Inflation In accordance with our long-term strategic view, we believe large-cap, dividend-paying U.S. multinationals should be a core component of an investment strategy given their strong balance sheets, dividend growth potential, and ability to capitalize on faster growth in developing markets. In this note, we focus on the positive relationship between dividends and inflation as another reason why investors should be favoring equity dividends over coupon payments from long-term Treasuries for income generation.
16-May-12	Data Detail: Housing Starts, Ind. Production - April 2012 There was a lot of talk that recent increases in housing starts were the result of homebuilders taking advantage of warmer-than-normal temperatures. The data suggest, however, that the weather effects were overblown and that construction levels are clearly rising. Residential construction will be a positive influence on GDP after many years of dragging down overall economic growth.
15-May-12	Data Detail: Retail Sales, Inflation - April 2012 Most of the weakness in April retail sales growth was due to pullbacks in spending that came from temporary distortions in spending patterns caused by warmer-than-normal temperatures during the winter (building material and supply dealers fell 1.8% after rising 2.7% in March) and a decline in gasoline prices (gasoline stations spending declined 0.3% after increasing 1.0% in March).
14-May-12	Fixedated: May 7 - 11, 2012 The investment world has reached yet another apex of fear. Greece’s newly adopted “Thanks for the help, but we have got it from here” stance towards further aid, China’s decelerating economy, and J.P. Morgan’s trading gaffe have investors piling into USTs. Greece's push back against previously negotiated austerity measures is akin to the tail trying to wag the dog. In this case, the tail is likely to get cut off if it continues to be a problem. Corporates were mixed. Investment-grade bonds continued to rally, hitting another all-time-low yield (3.53%), while high-yield sold off a bit. Munis continued to grind lower as investors sought out alternatives to USTs.
11-May-12	GDP Monitor: May 7 - 11, 2012 Fears that consumption growth was poised for a pullback have been alleviated somewhat as the softening in payroll growth looks to be due to volatility. Initial claims returned to their pre-Easter level. This suggests payroll growth in May should exceed the mediocre April gain and result in stronger future income growth. Please join us for the Briefing Research quarterly conference call on the economy with our Chief Economist, Jeff Rosen Ph.D., Director of Research, Kimberly DuBord, and Chief Market Analyst, Patrick J. O’Hare, on Tuesday, May 15, at 1:00 p.m. CT (2:00 p.m. ET). Space is limited, so register now.
10-May-12	Data Detail: Trade Balance - March 2012 The February trade deficit was affected by the Chinese New Year holiday, which fell earlier in the calendar than normal. Shipments that normally came during February were either pulled forward into January or delayed into March. After factoring out the volatility for the holiday, real net export growth was relatively flat for the past several months.
09-May-12	Trend Watch: April 16 - May 4, 2012 The Great Recession was driven by a credit contraction, and the U.S. continues to work its way out. Positive signs keep emerging, including new data over the last two weeks that indicate a rebound in small business lending may finally be here. Unfortunately, the credit situation continues to deteriorate in Europe. Standards loosened in the first quarter, but the reemergence of the eurozone debt crisis should lead to another round of tightening. And demand continues to decline. We discuss these points in this week's Trend Watch, as well as other views including why we would be cautious about initiating large, new positions in corporate bonds right now, and how a structural dislocation in the labor market could soften potential payroll gains.
07-May-12	Fixedated: April 30 - May 4, 2012 Treasuries rallied last week on weak economic data and, of course, European debt fears. The elections in France and Greece over the weekend did nothing to quell the uncertainties investors face. When in doubt, take cover – and USTs are the ultimate security blanket. Corporates saw good strength across the board last week as the investment- grade and high-yield indices moved to lower yields. Munis gained a bit last week and relative value also improved.
04-May-12	U.S. Economic Outlook: Bowed but Not Broken Recent developments, including a deceleration in payroll growth and a slight pullback in home construction, combined with long-run uncertainties from Europe and the U.S. fiscal cliff that will appear in January 2013 have raised alarms and have caused many economists to return to their pessimistic views. We do not think the economic situation has changed enough to warrant such pessimism. Conference Call – Briefing Research Q2 2012 Economic Outlook: Bowed but Not Broken Please join us for the Briefing Research quarterly conference call on the economy with our Chief Economist, Jeff Rosen Ph.D., Director of Research, Kimberly DuBord, and Chief Market Analyst, Patrick J. O’Hare, on Tuesday, May 15, at 1:00 p.m. CT (2:00 p.m. ET). Space is limited, so register now.
04-May-12	Data Detail: Employment Situation Report - April 2012 Questions still surround whether the warmer-than-normal temperatures experienced during the winter added some upward bias to the payroll figures for those months. The data, however, do not support this. Employment sectors where the jobs are primarily outside – such as construction, mining, or landscaping – did not show enough improvement during the winter to warrant the weather-related bias. That means that jobs growth has definitely slowed after strong winter gains.
01-May-12	Data Detail: ISM (Apr-12), Construction Spending (Mar-12) We have strongly advocated in the past to not rely on the ISM Index as an accurate indicator of the manufacturing sector. The April reading is one of those months where the index may not be providing an accurate picture.
30-Apr-12	Fixedated: April 23 - 27, 2012 Another week saw yet another series of disappointing events out of Europe, with Spain leading the way, and lackluster economic data in the U.S. (consumer sentiment and pending home sales notwithstanding). As such, the safety trade refused to loosen. Corporates gained across the board last week. The ML U.S. 7-10-year Corporate “A” Index hit an all-time-low yield (3.61%). Munis were fairly flat last week as participants took down the limited new-issue calendar with little trouble. The relative value argument for AAA munis remains intact.
30-Apr-12	Data Detail: Personal Income and Spending - March 2012 The personal income and spending data were already incorporated into first quarter GDP. The weaker-than-expected spending level in March is simply a function of upward revisions to both January and February consumption gains.
27-Apr-12	GDP Monitor: Reconciliation with Q1 2012 GDP First quarter GDP was not too far below expectations, although we saw another strong gain in inventories as a contributing growth factor. The bulk of the first quarter growth, however, came from a pickup in personal consumption.
25-Apr-12	Market Monitor: No Real Surprises from the Fed In essence there were two, key takeaways from the latest FOMC meeting and they did not surprise us at all, because they are consistent with what we have been saying for some time: (1) Monetary policy will remain supportive for the equity market; and (2) The FOMC remains fully prepared to adjust its securities holdings if incoming data warrant such a switch.
25-Apr-12	Data Detail: Durable Goods Orders - March 2012 Durable goods orders contracted in just about every sector in March. While this could be a sign of impending weakness left over from the December expiration of the accelerated depreciation tax credit, it is more likely normal volatility following better-than-expected demand in February.
24-Apr-12	Data Detail: Home Sales (Mar-12), Confidence (Apr-12) The decline in home sales was surprising considering the Mortgage Bankers Association’s Mortgage Purchasing Applications Index was up 10.2% in March. That might mean that potential buyers are facing more credit rejections, requiring them to fill out more applications in order to obtain a mortgage.
23-Apr-12	Fixedated: April 16 - 20, 2012 Treasuries traded within a fairly tight range last week as concerns over Europe’s debt issues and political environment had investors seeking shelter. Add in demand from the Fed’s Operation Twist and yields can continue to be suppressed for quite a while. Corporates saw small gains last week. The ML U.S. 7-10-year Corporate “A” Index is just 6 bps from its all-time low yield. Munis held strong last week. With UST yields pushing lower, the relative-value argument for AAA munis is strong.
20-Apr-12	GDP Monitor: April 16 - 20, 2012 Weak income numbers from March did not deter consumer spending, as consumers dipped into savings to meet their needs. They did so presumably with a sense of confidence that they will be able to replenish their savings at a later time. This is normal consumer behavior during recovery periods, but it is not something that has been seen in the data since the Great Recession ended.
18-Apr-12	Trend Watch: April 2 - 13, 2012 The yield on Spain’s 10-year bond has climbed from 4.58% on February 1 to as high as 6.02% on April 16. Over the same time period, the TED spread, which is regarded as a gauge of perceived credit risk in the general economy, has declined nearly 9 bps. A narrowing TED spread at this fearful juncture seems to imply that there is less fear about contagion risk from Spain hitting the U.S. economy and U.S. banks. We discuss that point in this week's Trend Watch. We also break down the Macau gaming market, including an update on our top recommendation in the industry, Las Vegas Sands, and discuss the hybrid vehicle market and its lack of customer loyalty.
17-Apr-12	Fixedated: April 9 - 13, 2012 Last week’s Treasury auctions were met with modest demand – which one could argue actually implied weakened interest given the renewed focus on Europe’s debt woes. Corporates were mixed. The ML US 7-10-year Corporate “A” Index is now just 7 bps above its all-time-low yield of 3.62%. The FactSet AAA 10-year Muni Index yield has rallied over 20 bps in the past month and is now near its early-March low.
17-Apr-12	Data Detail: Housing Starts, Indust. Production (Mar-2012) Housing starts tumbled for the second consecutive month after reaching a three-year high in January. The new trend adds credence to the belief that the rise to January’s peak was the result of warmer-than-normal temperatures pushing production forward, rather than an acceleration in the housing recovery.
16-Apr-12	Tax Increases Will Not Solve the Debt Problems With the fear that debt-to-GDP levels are widely becoming unsustainable across the developed world, many governments are reacting by instituting or debating sizable austerity measures. New research shows that tax increases will not have a sizable effect on lowering debt levels. The bulk of austerity must come from spending cuts if debt levels are to be lowered.
16-Apr-12	Data Detail: Retail Sales - March 2012 Weakness in the labor sector and a decline in the number of motor vehicle units sold had no effect on consumer demand in March as retail sales easily beat expectations. This is a strong signal that volatility in monthly income is not changing consumer attitudes that the economy is improving.
13-Apr-12	Market Monitor: Beware Seasonal Affective Disorder Can the equity market rally continue? It can and we believe it will, but we do not think it will be a rally that continues uninterrupted. Several psychological challenges are festering that could lead to some unsettling selling pressure and heightened volatility after the strong start to 2012. Accordingly, our near-term tactical view is more cautious entering the seasonally pernicious May to October period. Be that as it may, we continue to hold to our long-term view that stocks offer excellent relative value versus bonds.
13-Apr-12	GDP Monitor: April 9 - 13, 2012 The outlook for the first quarter brightened a bit when the February trade data came in much better than expected. What is good news today, however, may be foreshadowing weakness down the road. Large cutbacks in imports could be a sign that manufacturers, wholesalers, and retailers are preparing for a drop in consumer demand over the next few months. That would mean that our expectations for stronger growth in the second quarter are unwarranted.
13-Apr-12	Data Detail: Inflation - March 2012 A quirk in the seasonal adjustment calculations in the energy index caused consumer prices to outgain producer prices in March. The overall trend in the annual data remains downward, however, as both inflation measures have fallen for six consecutive months.
12-Apr-12	Data Detail: Trade Balance - February 2012 The trade deficit narrowed substantially in February, adding hope for better first quarter GDP growth. Looking at the details, however, the drop in imports could be an early sign that manufacturers, wholesalers, and retailers are readying themselves to face potentially weaker consumer demand.
09-Apr-12	GDP Monitor: April 2 - 6, 2012 With the March employment data seemingly confirming Fed Chairman Bernanke’s concerns about the sustainability of labor sector strength, economists quickly clamped down on talk of above potential growth in the near term. That, however, may be reading too much into one month of data.
09-Apr-12	Fixedated: April 2 - 6, 2012 An unexpectedly weak March employment report caused Treasuries to rally and brought the 10-year yield down to its lowest point since the last FOMC meeting. Corporates were fairly sturdy with investment grade outperforming high-yield bonds for the week. Muni yields followed the rally in Treasuries amid decent new issue volume.
06-Apr-12	Data Detail: Employment Report - March 2012 There was talk among economists prior to the report that warmer-than-normal weather conditions added to the payrolls in December, January, and February. Thus, a pullback in March was expected. In our view, weather did not play a role the payroll numbers. That makes these job numbers even more disappointing. Still, there is little reason to believe that the job sector will not rebound strongly in April.
04-Apr-12	Trend Watch: March 19 - 30, 2012 Friday's Prospective Plantings report from the USDA ratcheted higher the projection for corn plantings in the 2012/13 season, at the expense of both wheat and soybeans. This record-setting figure would have set a negative tone for corn prices if it were not for Friday's other release, the Grain Stocks report. We review those reports in this week's Trend Watch, while also discussing ways to invest in water, a vital resource that may begin encountering supply issues, and two new reports that say the euro area may already be out of a recession.
02-Apr-12	Data Detail: Construction (Feb-12), ISM (March-12) The quick rebound in the demand for business investment gave hope that the rebound from the accelerated depreciation tax credit would be equally as fast in the construction sector. That was not the case, unfortunately, as nonresidential construction spending fell 1.6% in February on top of the 2.3% decline in January.
02-Apr-12	Fixedated: March 26 - 30, 2012 Treasuries ended the week with a modest gain as the market was reminded of the economic impact of austerity measures in Europe. The fact is, the threat never went away – and will not for a long time. Corporates were mostly flat as neither investment-grade nor high-yield bonds saw much of an impact from the movement in Treasuries. Munis gained a bit on the week. A drop in new issuance forced participants to look to the secondary market for supply.
30-Mar-12	GDP Monitor: March 26 - 30, 2012 Newly revised data from the DOL show that initial claims have not bounced back as strongly as originally thought. Instead of falling to nearly 350,000, the four-week average has only declined to 365,000. The downward trend, however, remains the same and improvements in the labor situation cannot be denied. The data still support the notion that the economy is on the verge of accelerating back toward potential.
30-Mar-12	Data Detail: Personal Income and Spending - February 2012 Strong gains in the auto sector and higher gasoline prices helped consumption growth easily outperform expectations in February.
29-Mar-12	Equity Strategy: Earnings Up, Dividend Payout Ratios Down From our vantage point, we believe there is a risk of complacency in the market over the near term as earning growth slows and investors lock in gains after a tremendous first quarter. For those concerned that a market correction could occur, high-quality, high-dividend stocks provide a conservative alternative. We adjusted our proprietary dividend model to screen for companies that have liquid balance sheets and low dividend payout ratios. These companies have the balance sheets to sustain any correction, and to potentially increase payout ratios.
28-Mar-12	Data Detail: Durable Goods Orders - February 2012 Pullbacks following one-time incentives, such as the December expiration of the accelerated depreciation tax credit, typically result in multiple months of abnormal growth. It is likely the tax credit played a key role in the rebound in demand for durable goods in February.
27-Mar-12	Data Detail: Consumer Confidence - March 2012 Concerns about the effect rising gasoline prices could have on economic growth weighed heavily on consumers’ minds in March, driving both consumer sentiment and consumer confidence lower this month.
26-Mar-12	Fixedated: March 19 - 23, 2012 Treasuries taketh and Treasuries giveth right back. After rising about 35 bps since March 12, the 10-year quickly took back as many as 15 bps by the end of last week. So much for runaway yields. Corporates were slightly weaker, but mostly treaded water as participants waited for a clearer picture of the direction of the Treasury curve to develop. Munis were stable as many new deals saw price bumps once again.
23-Mar-12	Equity Strategy: Earnings Revision Analysis With the first quarter reporting period only a few weeks away, a slowdown in earnings growth presents a near-term risk for the equity market. In an effort to reveal potential areas of risk (and opportunity), we performed a data-driven analysis of S&P 500 companies that highlights trends in first quarter price performance and first quarter earnings revisions.
23-Mar-12	GDP Monitor: March 19 - 23, 2012 The housing data in February, for both sales and construction, were disappointing compared to January levels. Nevertheless, that does not change our view that the housing sector has bottomed and will provide a positive contribution to GDP growth through the rest of 2012.
23-Mar-12	Data Detail: Home Sales - February 2012 Both new and existing home sales declined modestly in February, but the moves were most likely the result of month-to-month noise rather than a shift in demand for housing.
22-Mar-12	Water Battles Intensify: The Fight over Inflation There are some worries among market participants that Federal Reserve actions during the Great Recession will ultimately lead to a severe inflation shock that could potentially result in hyperinflation. We believe these fears are overblown and inflation is likely not going to be a problem in the near future. The economy has been mired in a liquidity trap. That means past and future monetary policy actions, through quantitative easing and other measures directed at increasing the money supply, have had very little effect on both output and inflation.
21-Mar-12	Trend Watch: Feb. 27 - March 16, 2012 For the first time in quite a while, we do not have a strong preference for either investment-grade or high-yield corporate bonds. We tend to favor high yield at this point, as it will generally hold up better in an environment where Treasury yields could continue to rise. We discuss those points in this week's Trend Watch. We also preview two highly-anticipated grain reports from the USDA and take exception to those pundits who claim quantitative easing is the only reason why the equity market has rallied.
20-Mar-12	Data Detail: Housing Starts - February 2012 Housing starts did not detour from their previous three-month average in February. On the surface, that suggests housing starts remain on a clearly improving trend. The underlying details, however, paint a more worrisome picture that the strong gains in December and January may simply have been aberrations.
19-Mar-12	Fixedated: March 12 - 16, 2012 Treasuries took a hard fall last week as investor concerns about inflation drove some participants to the sidelines and others perhaps back into equities. Corporates were mixed as high-yield bonds managed a small gain while investment-grade debt followed Treasury yields higher. Munis were softer as well, but performed well relative to USTs.
16-Mar-12	Equity Strategy: Financials for the Recovery Based on our expectation that the U.S. economy will outperform in 2012, a tactical equity strategy is to identify investment opportunities in economically-sensitive industry groups/stocks that are still well below their 2007 closing levels. With the recent release of the bank stress test results, we focus our analysis on the major banks and the investment banks.
16-Mar-12	GDP Monitor: March 12 - 16, 2012 Even though the first quarter is still tracking below even moderate “new normal” growth rates, the underlying data are still pointing toward a solid rebound through the remainder of the year. This week, it was strong retail sales and jobless claims reports that highlighted the improving economic dynamic.
16-Mar-12	Data Detail: Inflation, Industrial Production (Feb-12) Inflation levels turned higher in February as the recent run-up in gasoline prices was finally accounted for in both the CPI and the PPI. Outside of the energy sector, however, price growth remained tame.
13-Mar-12	Market Monitor: FOMC Has Its Say and Says Nothing New The March 13 directive from the Federal Open Market Committee read a lot like the directive from the January 24-25 FOMC meeting. Accordingly, the reminder and message of the Federal Reserve's monetary policy remains the same: it is supportive of the equity market.
13-Mar-12	Data Detail: Retail Sales - February 2012 Last month’s unexpected drop in motor vehicle sales gave way to a solid rebound in February, which led to a modest upside surprise in the retail sales data. That bodes well for first quarter consumption levels.
12-Mar-12	Fixedated: March 5 - 9, 2012 While Treasuries were lower on the week on a softened safety trade, last week’s peak yield of 2.05% is still very low historically. As the triggering of Greek CDS failed to send the market into turmoil late Friday afternoon, those who have been steering a series of Greek bailouts took a victory swim around the Greek Islands. Corporates were weaker as well with high-yield bonds sustaining most of the damage. The muni market had some difficulties taking down a deluge of new issues and concessions were a common theme.
09-Mar-12	GDP Monitor: March 5 - 9, 2012 Many economists and pundits in the media are skeptical that the recent improvements in the economy will last. They point toward similar undercurrents at the beginning of 2011, which ultimately failed to gain traction. This time, however, payrolls have grown on average by nearly 100,000 more per month than they did last year, businesses are stockpiled with cash, and consumer debt is more manageable.
09-Mar-12	Data Detail: Employment Report (Feb-12), Trade (Jan-12) Nonfarm payrolls, over the past three months, have increased at their fastest rate since early 2006. Furthermore, layoff activities have diminished greatly as the initial claims level has stabilized at roughly 355,000. There is no doubt that the labor sector is picking up momentum and the economy is beginning to show signs of a pending acceleration.
08-Mar-12	Are Small Businesses Missing the Recovery? Newly-published data from the BLS show that large businesses have been leaders in labor market growth following the end of the Great Recession. That observation is in direct contrast with common economic thought, backed up with data provided by ADP, which shows small businesses are the primary source of the post-recessionary employment gains. The conflicting data adds another wrinkle into understanding why employment growth has been unexpectedly weak over the last few years.
07-Mar-12	Banks Are Stressed Out and Better for It The long-term investment outlook for the large bank holding companies is getting better, not worse, because of the increased regulatory standards. The results of the Federal Reserve’s 2012 Comprehensive Capital Analysis and Review should demonstrate that large bank holding companies are better investments today because they have a lower risk profile and can withstand stress scenarios that are even more rigorous than the scenarios considered at the time of the first stress test in 2009, when the world was a more stressful place. In this note, we highlight the improving capital ratio trends for the large bank holding companies and discuss other factors underpinning their improving investment outlook.
05-Mar-12	Fixedated: February 27 - March 2, 2012 Treasuries are still attracting safe-harbor interest as the market awaits the final outcome of Greece’s proposed debt restructuring and as Iran continues to make its neighbors, the U.S., and the oil market uneasy with its nuclear rhetoric. Corporates gained for the week as the investment-grade index finished just 2 bps off its all-time low yield of 3.62% and the high-yield index went below the 7.00% mark for the first time since last June. In the municipal market, California was the week’s big winner.
02-Mar-12	GDP Monitor: Feb. 27 - March 2, 2012 Another week, another downward revision to our GDP forecast, and yet more evidence surfaces that supports the notion that an accelerated turnaround is near.
01-Mar-12	Data Detail: ISM (Feb-12), Construction, PCE (Jan-12) All month long, the regional manufacturing surveys showed solid improvement in both manufacturing demand and production. Yet, that failed to translate into a positive national ISM reading. The discrepancy leads us to believe the manufacturers surveyed by the ISM in February were not a true representation of the entire industry.
01-Mar-12	Trend Watch: Feb. 6 - 24, 2012 The major headwind for the financial sector has been the eurozone debt crisis. A more challenging earnings environment has also acted as a restraint to upside moves. From our vantage point, the more important development is that declines have been less severe during turbulent periods, as that suggests a diminution of worst-case fears. In brief, we see a transition unfolding where the financial stocks are no longer being looked at solely as trading vehicles, but as long-term investments, once again. We discuss that point in this week's Trend Watch, as well as other views that include an adjustment to our bullish stance on corporate bonds and a potential boost to the new home sector.
28-Feb-12	Institutional Long Equity Allocation -- Q4 2011 Over the past year, instutional investors have steadily increased their overweighting of the health care and technology sectors. Allocation to financials fell sharply after four consecutive quarters of increases yielding positions by institutional investors of slightly overweight. Institutional investors in aggregate increased their long equity allocation in Q4 2011 relative to the S&P 1500 in energy and technology. They decreased their allocation in consumer discretionary and financials. Money flowed into fixed income ETFs at a faster rate than domestic and international equity ETFs for the third consecutive quarter. Corporate debt ETFs had a net inflow of $12.1 bln, the largest inflow on record.
28-Feb-12	Data Detail: Durables (Jan-12), Consumer Confidence (Feb-12) A large drop in business investment demand in January made for an ugly headline. Fortunately, the pullback is likely the result of a one-time event – the end of the 2011 accelerated depreciation tax credit – and not the start of a new downward moving investment trend.
27-Feb-12	Fixedated: February 20 - 24, 2012 Even in the face of more positive U.S. economic data, Treasuries regained lost ground by week’s end. Explanations for the rally range from fears that the Greek debt deal will not end well or that the current backstop is insufficient, to Fed buying, to fears that escalated oil prices will derail the economic recovery. In our view, the Treasury market feels a bit overbought at this point. Corporates rallied across the board. The investment-grade and high-yield indices are now just 3 bps and 40 bps away from their all-time-low yield-to-worst, respectively. Munis were slightly weaker once again. CA will be a major focus this week.
24-Feb-12	GDP Monitor: Feb. 20 - 24, 2012 While this was a slow week with few economic reports to evaluate, recent moves in both the initial claims level and consumer sentiment point toward a recovery that is itching to accelerate.
24-Feb-12	Data Detail: Home Sales - January 2012 While the increase in existing home sales in January follows the trend of improving housing market conditions, the data from the National Association of Realtors (NAR) continue to suffer from large negative revisions. Given that the pending home sales index and the Mortgage Bankers Association Mortgage Purchase Index both contracted for January, it would not be surprising if the January sales number was overstated and is revised lower next month.
21-Feb-12	Fixedated: February 13 - 17, 2012 Treasuries were slightly off last week with the 10-year yield finishing one basis point higher after rallying down to a yield of 1.91% mid week. Chalk one up for European leaders as they were finally able to agree to the second bailout package for Greece. Now the hard work begins – reinventing Greece’s economy. Corporates were mixed as high-yield bonds outperformed investment-grade debt. The ML U.S. High-Yield Master II Index is now just 59 bps away from its all-time low yield to worst. Munis were solid and saw a slight gain last week.
17-Feb-12	GDP Monitor: Feb. 13 - 17, 2012 The economic data over the past several weeks has largely surprised on the upside, especially labor market data. Nonetheless, our economic forecast for the first quarter was revised down.
17-Feb-12	Data Detail: Inflation - January 2012 Inflation worries intensified somewhat in January as core prices for both producers and consumers increased more than expected. Consumer prices, in particular, saw their largest increase since September 2008, pushing closer to the 2.5% upper bound in the Federal Reserve’s implied CPI target window.
16-Feb-12	Data Detail: Housing Starts - January 2012 A strong gain in starts, combined with an acceleration in the number of homes currently under construction, suggests the residential construction sector is finally on a steady, upward trend. Residential construction is poised to be a positive contributor to 2012 GDP.
15-Feb-12	Data Detail: Industrial Production - January 2012 For the second time in two days, a weaker-than-expected headline figure for a key economic metric masked solid underlying trends. In the case of today’s industrial production data, warmer-than-usual temperatures, which lowered demand for heating, combined with a slight pullback in mining activities completely offset gains in the manufacturing sector.
14-Feb-12	Data Detail: Retail Sales - January 2012 Aggregate retail sales growth came in below expectations for the second consecutive month. Under normal circumstances, this would call into question our forecast for a consumption-led recovery in 2012. The details, however, suggest that the weakness in January sales is likely statistical or survey related and not an indicator of a slumping consumer.
13-Feb-12	Fixedated: February 6 - 10, 2012 Buyers lined up at the UST 10- and 30-year sales (dollar demand for both was among the highest it has been in four years) as Europe continued to fumble its way through its debt crisis into the weekend. Greek leaders, however, were finally able to cobble together (and pass) a new austerity package. This still does little (if anything) to address Greece’s broken economy. Corporates were up a bit across the board as some investors sought the safety of investment grade while others stretched for more yield. Munis were also slightly weaker as AAA bonds could not catch up with the end-of-the-week UST rally.
10-Feb-12	GDP Monitor: Feb. 6 - 10, 2012 Using hard data from the fourth quarter, our economic model continues to forecast a relatively weak economy as we head further into 2012. Recent gains in the labor market, however, point toward more solid consumption growth than the hard data implies. A more complete intuitive analysis points to the prospect of real GDP growing at nearly 3.0% in the first quarter. Using the latest statistics, that is a sizable, but plausible, uptick from the model output.
10-Feb-12	Data Detail: Trade Deficit - December 2011 The trade deficit widened in December, but was in-line with the estimates used by the Bureau of Economic Analysis in the advance Q4 2011 GDP. The trade numbers should not have a substantial effect on the second estimate of fourth quarter growth.
09-Feb-12	U.S. Economic Outlook Conference Call: Q1 2012 Weak domestic production in Q4 2011 and uncertainties throughout Europe suggest GDP growth will remain below trend (2.7-3.0%) in the near term. Pessimism is currently running deep for most economic forecasters. It is no surprise to see most forecasts project roughly 2.0% growth over the next couple of years. Yet, for all of the weakness that is expected to play out through 2013, we see more upside potential than downside risk over the course of the outlook. Click here for the presentation.
09-Feb-12	State of the U.S. Motor Vehicle Industry: 2012 For the past several years, the recession and the economic uncertainty in the immediate aftermath caused motor vehicle sales to fall to their lowest point since data became available in 1976. The lack of sales growth caused a structural shift in the underlying fundamentals lining the motor vehicle market. Used car prices, scrappage rates, vehicle ages, and the number of cars per driver are all outside historic equilibrium levels, suggesting high pent-up demand. This reality, coupled with a stable and improving U.S. economy, sets up the potential for auto sales to exceed forecasts in 2012.
08-Feb-12	Trend Watch: Jan. 23 - Feb. 3, 2012 The S&P 500 has gotten off to a banner start in 2012, up 7.1%. That stellar return has caught many sidelined investors by surprise. That is not the case for Wall Street strategists, however. The question today is, will these strategists get more aggressive with their price targets or will they turn conservative knowing they can already claim price target victory? We discuss that point in this week's Trend Watch, along with other views including our bullish stance on copper and how high-yield bonds, while no longer cheap, still have more upside than investment-grade bonds relative to U.S. Treasuries.
06-Feb-12	Fixedated: January 30 - February 3, 2012 Treasuries were headed for a positive move last week until the January jobs report touched off hopes of better-than-expected economic growth. Yields remained relatively low as safety continued to trump data. Corporates were mixed. High-yield debt rallied as investors sought out alternatives to stubbornly low UST yields. The investment-grade index hit an all-time-low yield of 3.67% before backing up to 3.74% by the week’s end. Munis were slightly weaker, but demand for new issues remained strong.
03-Feb-12	U.S. Economic Outlook: Growth Prospects, Full Speed Ahead Pessimism is currently running deep for most economic forecasters. It is no surprise to see most forecasts, including this one, project roughly 2.0% growth over the next couple of years. Yet, for all of the weakness that is expected to play out through 2013, we see more upside potential than downside risk over the course of the outlook. Conference Call – Briefing Research Q1 2012 Economic Outlook: Growth Prospects, Full Speed Ahead Join us for the Briefing Research quarterly conference call on the economy with our Economist, Jeff Rosen Ph.D., Director of Research, Kimberly DuBord, and Chief Market Analyst, Patrick J. O’Hare, on Wednesday, February 8, at 10:00 a.m. CT (11:00 a.m. ET). Space is limited, so register now.
03-Feb-12	Employment Report: January 2012 There have been numerous discussions among media pundits Friday morning trying to explain that the January employment report is not as strong as it seems. Quite simply, they are wrong.
01-Feb-12	Data Detail: ISM (Jan-12), Construction Spending (Dec-11) Strong gains in new orders and backlogs drove manufacturing activities higher for the fourth consecutive month. The gain in backlogs, specifically, should be enough to keep production moving ahead in the near term.
31-Jan-12	Data Detail: Consumer Confidence - January 2012 Given the substantial strengthening in the labor sector over the last few weeks – initial claims fell to a three-year low – and the upward trend in equity prices, one would expect consumer confidence to increase in similar fashion to consumer sentiment. The fact that confidence instead declined could mean consumers do not believe the recent economic gains are long lasting.
30-Jan-12	GDP Monitor: Reconciliation with Q4 GDP Although fourth quarter GDP missed expectations, growth levels looked healthy on the surface. As we expected, though, most of the gain came from highly volatile inventory changes. Real final sales, which exclude inventories, eroded dramatically from third quarter levels and increased at the slowest pace since Q1 2011.
30-Jan-12	Fixedated: January 23 - 27, 2012 Treasuries shook off the mid-week blues and rallied as the Fed extended its “low Fed funds rate” time frame to at least late-2014, Iran rattled the oil market, and Greece put up some verbal resistance to new bailout proposals. When times are tough, it is good to be the king – even if your crown is slightly tarnished. Corporates rallied across the board as more buyers reached for yield away from USTs. The A-rated index fell to 3.72% – just 3 bps from its all-time low. Munis rebounded and followed USTs to lower yields.
30-Jan-12	Data Detail: Personal Income and Spending - December 2011 Strong employment and earnings growth in December led to a healthy increase in personal income. That gain, however, did not translate into consumption growth as consumers instead decided to forgo spending for saving.
27-Jan-12	Data Detail: Fourth Quarter GDP 2011 The advance estimate for fourth quarter real GDP showed economic output increased at an annual rate of 2.8%. That was the strongest rate of growth since the second quarter of 2010. Still, the growth was not all that market participants had hoped it would be. Real final sales, which exclude the change in inventories, were up just 0.8%.
26-Jan-12	Data Detail: Jobless Claims - January 21, 2012 Initial claims for the week ending January 21 increased by 21,000 to 377,000. Granted that is the wrong move directionally, yet the uptick was not a material deviation that some might have feared would be seen given the Department of Labor’s admission that problems with seasonal adjustment factors may have influenced the readings in recent weeks. Importantly, the uptick in initial claims did not alter the improving trend in the 4-week moving average, which decreased by 2,500 to 377,500 and has returned to levels seen in the summer of 2008.
26-Jan-12	Data Detail: Durable Goods Orders - December 2011 The Durable Goods Orders report for December fit the mold of presenting better-than-expected data for the fourth quarter. More importantly, though, it fit the mold of a growing economy. Total orders increased 3.0% on top of an upwardly revised 4.3% increase in November. Orders were up 2.1%, excluding transportation; meanwhile, new orders and shipments of nondefense capital goods excluding aircraft both increased 2.9%.
25-Jan-12	Market Monitor: Fed Opens Line of Communication The Federal Reserve took an historic step today in communicating monetary policy by providing FOMC participants' individual forecasts for the appropriate timing of policy firming. The end result caught the market by surprise as it is now believed economic conditions are likely to warrant an exceptionally low level for the federal funds rate at least through late 2014.
25-Jan-12	Trend Watch: Jan. 9 - 20, 2012 With 20% of S&P 500 companies having reported through January 23, 58% have exceeded estimates. However, the new, blended EPS growth expectation has fallen to 5.9%. That indicates the trend we have highlighted in prior quarters, that sell-side analysts tend to underestimate the current quarter, may not hold in Q4 2011. At the same time, though, earnings estimates for 2012 and 2013 have inched higher. We discuss those points in this week's Trend Watch, along with other views that include how we continue to favor high-yield debt and how a lasting asset allocation shift and larger corporate investment could lead to outperformance in the U.S. equity market and the U.S. economy.
23-Jan-12	Fixedated: January 17 - 20, 2012 Treasuries could not hold on to a mid-week rally as the 10-year UST pushed through the 2.00% level for the first time since January 10. Hopes grew that Greece would reach a “haircut” deal with private creditors – a hope that has yet to come to fruition. All bets are off should negotiations fail. Corporates were mixed last week. Investment-grade bonds sold off with Treasuries while high-yield debt rallied as investors reached out on the risk spectrum. The muni rally finally fizzled last week following longer-maturity UST yields higher.
20-Jan-12	GDP Monitor: Jan. 16 - 20, 2012 While there was a lot of economic data to digest this week, the bulk of the data either met expectations or failed to produce much change in our fourth quarter GDP forecast. This has been going on for the past several weeks as the monthly volatility in each economic growth sector has notably slowed.
20-Jan-12	Market Monitor: Opportunity Knocking The high equity risk premium reveals the considerable return potential that exists for the S&P 500 if the market can get past its subjective fears. There is apt to be some unsettling developments along the way, but at this point, with the equity risk premium sitting where it was in January 2009, it is arguable that a recession and a credit implosion in Europe are already priced into the market. In this note, we lay out our reasoning for why we think the market should be able to overcome what we consider to be the three most realistic fears related to the 2012 equity market outlook. At the same time, we highlight a shift in trend dynamics for three major growth drivers that we expect to temper fears about the outlook for the U.S. economy and the U.S. equity market.
19-Jan-12	Data Detail: Housing Starts, Inflation (Dec-11) After averaging 572,000 starts from May 2010 through August 2011, new housing construction has ratcheted higher and averaged 654,000 starts over the last four months through December. The recent gain has led many economists to believe that the housing sector will be a growth sector for the economy in 2012. We are still unsure that the recent gains are stable.
18-Jan-12	To Combat Rising Debt, Governments Roll the Dice The overriding theme in the U.S. gaming market is the quest for tax revenue. While debt burdens will not go away, the trend of regional gaming expansion may be in its late stages due to rising competition driven by gaming market saturation. That theme may be exported to Asia. Developed markets such as Japan are considering a significant expansion in gaming to combat struggling economies, rising debt levels and decreasing tourism. It is simply too early to predict winners in any of these developing gaming markets. While publicly-traded operators will battle for the remaining growth markets in the U.S., the industry will shift toward online gaming and further Asian expansion.
18-Jan-12	Data Detail: Industrial Production - December 2011 As expected, the decline in manufacturing production in November was not the start of a new trend. In fact, production spiked in December to its highest level since August 2008, and new data from the Federal Reserve Bank of New York’s Empire State Manufacturing Survey suggest production should continue to gain ground in January.
17-Jan-12	Fixedated: January 9 -13, 2012 Treasuries continued to ride the wave of global unrest (including the long-awaited S&P European downgrades) with the long end of the curve posting substantial gains for the week. However, it is hard to believe that S&P caught anyone off guard which makes linking the rally to the downgrades fairly suspect. Corporates rallied as investors continued to seek out more yield. Muni yields continued to grind lower with the FactSet 10-year AAA Muni hitting yet another low.
13-Jan-12	GDP Monitor: Jan. 9 - 13, 2012 As a whole, the economic data this week came in far below expectations. The underlying trend, however, suggests that the recent weakness is likely the result of normal volatility following three months of relatively strong growth. Our fourth quarter GDP forecast had assumed a temporary pullback was coming and, as a result, the data had little impact on our current forecast. We are confident that GDP will remain above trend for this quarter.
13-Jan-12	Data Detail: Trade Balance - November 2011 For the second consecutive month, export demand deteriorated. However, the recent declines are not the result of a global slowdown caused by the European debt crisis or weakness in Asia. The bulk of both declines came from an unusual drop-off in demand for nonmonetary gold.
12-Jan-12	Data Detail: Retail Sales - December 2011 While it is too early to call a prolonged downturn in consumption following one month of negative data, it is concerning that sales weakened at the same time that aggregate earnings jumped 0.7%. It seems consumers increased their savings rate in December, which implies that consumer debt remains a hindrance to current consumption.
11-Jan-12	Trend Watch: Dec. 19, 2011 - Jan. 6, 2012 Even though most consensus forecasters are predicting above potential GDP growth in the fourth quarter, the consensus estimates for daily economic data have been extremely pessimistic. In fact, the pessimism is so strong that the Briefing Research Daily Surprise Index is showing the real economy is outperforming consensus expectations by the largest amount since the index was created in 2000. We discuss that point in this week's Trend Watch, along with other views including how demand could be the swing factor for crude oil prices in 2012 and how high-yields bonds may have more upside than investment-grade bonds relative to U.S. Treasuries.
09-Jan-12	Fixedated: January 3 - 6, 2012 Treasuries ended the week mixed with the long end of the curve taking the most damage. This week brings the start of earnings season, a bevy of economic data, more tension in the oil market and yet another meeting between French President Sarkozy and German Chancellor Merkel. For managers that like volatility, this could be your week. Corporates rallied a bit last week. High-yield debt continues to perform well as the index has fallen 99 bps since Nov. 28, 2011. Munis continued to rally as the FactSet 10-year AAA Muni Index hit yet another all-time low at 2.23%.
06-Jan-12	GDP Monitor: Jan. 2 - 6, 2012 The important takeaway with the December employment report is that it shows the labor market is improving. That trend dynamic cannot -- and should not -- be understated. An improvement in the labor market is an essential component for restoring confidence to consumers and businesses alike which, in turn, can precipitate positive economic surprises in 2012.
06-Jan-12	Data Detail: Employment Report - December 2011 The employment situation in the U.S. can be resolutely described as improving. The December employment report was the latest reminder of that important point. This trend dynamic cannot — and should not — be understated. An improvement in the labor market is an essential component for restoring confidence to consumers and businesses alike that, in turn, can precipitate a positive feedback loop.
05-Jan-12	Briefing Research Chart Book: January 2012 The S&P 500 is more attractively priced for long-term price appreciation today than it was when 2011 started. The forward four-quarter earnings yield for the S&P 500 is 8.6% versus 7.7% at the end of 2010. Moreover, the spread between the 10-year Treasury yield stands at 670 bps today versus 470 bps when 2011 began, reinforcing our view that equities offer better long-term relative value over bonds at current prices. The Briefing Research Chart Book provides a telling snapshot of our fundamentally-based argument, as well as an accompanying picture of key trends for the U.S. economy and the fixed income, commodities, and currency markets.
03-Jan-12	Data Detail: ISM (Dec-11), Construction Spending (Nov-11) After being on the verge of falling into a contraction phase for most of the summer and fall months, the manufacturing sector is back on steady ground and moving in an upward direction.
03-Jan-12	Fixedated: December 27 - 30, 2011 Treasury yields moved lower as participants sought safety at the end of the year as Europe’s debt crisis – and its possible impact on the U.S economy should it worsen – continued to spook the market. Corporates followed the lead of Treasuries as both the IG and HY indices gained some ground. Munis ended the week strong as the FactSet 10-year AAA Muni Index hit a new all-time low yield.

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