The Economy and Bond Market Radar (December 10, 2012)
Treasury bond yields were little changed this week as economic data was mixed and the fiscal cliff continued to dominate the news flow but without much progress. The chart below is of the University of Michigan Consumer Confidence Index which fell by an unexpectedly large amount, likely driven by concerns regarding the fiscal cliff and the related tax and spending implications for consumers.
Strengths
- November unemployment fell to 7.7 percent and nonfarm payrolls expanded by 146,000 which was better than expected as Hurricane Sandy was expected to have a negative impact on job creation but apparently it only had a modest impact.
- U.S. auto sales were strong in November, driven by Hurricane Sandy replacements. It was the best month in five years as industry-wide sales grew 15 percent over last year.
- Factory orders rose 0.8 percent in October, ahead of expectations for a 0.1 percent increase.
Weaknesses
- The University of Michigan Consumer Confidence Index fell sharply and well below estimates.
- The ISM Manufacturing Index fell to a three-year low and is at a level that would indicate contraction in the manufacturing sector.
- Eurozone retail sales fell 1.2 percent in October. This was the biggest drop in six months and well below expectations.
Opportunity
- The fiscal cliff is front and center on investorsā radar and if a compromise can not be reached that would be a negative for the market and economy.
- Europe appears to be on the verge of another crisis but policy makers continue to bicker, just adding to the uncertainty.
Threat
- The fiscal cliff is front and center on investorsā radar and if a compromise can not be reached that would be a negative for the market and economy.
- Europe appears to be on the verge of another crisis but policy makers continue to bicker, just adding to the uncertainty.
