Are Economists Too Bearish?
Economists have a long history of not being able to forecast economic data with all that much accuracy, but they were way off the mark today. Today's data came in much better than expected, especially in light of the consensus forecasts which called for more declines. Maybe economists are too bearish right now?
To wit, new home sales for February increased +4.7%, which is far better than the -2.9% decline that was expected by economists. The positive surprise is helping boost the housing index by roughly +8% this morning. Also, February durable goods orders increased +3.4%, vs. estimates which called for a decrease of -2.5%.
This was the first increase in durable goods in six months. What is interesting to me is that February was widely believed to be a horribly weak month for the economy. But if these datapoints are indicative of a trend, then maybe the economy didn't contract as much as widely believed.
Yesterday, Goldman Sachs (GS) said it would like to pay back the TARP funds to the govt. Today, Bank of America (BAC) is saying the same thing. It seems the banks don't like the onerous oversight and regulation that comes with receiving these bailout funds. If it doesn't worry the market, I say go for it.
Asian markets were mostly lower in overnight trading on profit taking; the dollar is lower this morning, while gold is higher; oil is also lower, but still hovering above $53; the 10-year yield is up to 2.72%; and the VIX is again testing its 200-day support around 41.82.
Trading comment: Was that it for the pullback?!?? One day?? Man, it looks like underinvested portfolio managers really want to put cash to work ahead of quarter end. Add to that a dose of performance anxiety and this rally really didn't give the bulls a good chance to jump on board.
Yesterday, we were stopped out of our short bond etf (TBT) at break even after the Treasury said it would begin buying long-term Treasury notes today. While I still think bond yields will move higher longer-term, this buying pressure in the market from the Fed could keep yields low for the time being.
I will be looking to start dipping my toe in the water today by adding some biotech (XBI) exposure. I like the growth profile for this group, as well as the acquisition activity coming from big pharma. I might also look to add to our consumer staple stocks (XLP).