Wednesday, September 03, 2008

Factory Orders Remain Surprisingly Strong

The market is a bit lower in early trading, despite some positive economic news. Factory orders in July rose a stronger than expected +1.3%, the 5th straight month of positive growth. This supports the notion that while the finance/lending/housing markets are deep in recession, the industrial side of the economy is in okay shape, and has kept the overally economy out of a true recession.

I have written how the selling in commodity-related stocks has been relentless, and felt like some big funds were in trouble. Last night came the news that the hedge fund Osparie, which Lehman owns 20% of, lost -27% in August and will close down.

When a $4 billion fund is forced to liquidate, it creates massive selling pressure, not to mention that I'm sure this fund was not the only big hedge fund caught leading the wrong way recently.

Corning (GLW) is down -8% after issuing an earnings warning that Q3 results will come in below expectations due to lower LCD glass shipments (global slowdown?).

Asian markets were mixed overnight; oil is lower for the 4th day, near $107.85; and the 10-year yield is lower to 3.72%, a new multi-month low.

While some will point out that this could signal slower economic growth, I think the lower yields have more to do with inflation expectations falling, which is a long-term positive. Lower yields should also help mortgage rates come down a bit, which is another step in the right direction for the housing market and an eventual bottom for that industry, maybe sometime in 2009.


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