Shorter Peter Boockvar:
“With the American Int’l Group (stk actually trading higher pre markett) now being one step closer to be renamed Absolute Involvement by Government and a huge capital raise by HSBC, one of the better capitalized global banks, there is no place to hide except in China whose market was little changed.
Also, more uncertainty with Western Europe’s approach with the deteriorating situation with countries in Eastern Europe is raising the bar of questions for the whole EU as a financial aid plan for the region was denied.
The Euro is just shy of its lowest level vs the $ since Nov in response. Global bond markets are the main beneficiary of the equity weakness today. As the US consumer shifts its focus to saving from spending, the Jan income/spending #’s and the savings rate will be out at 8:30am.
Also of great importance will be the Feb ISM # at 10am and is expected to fall almost 2 pts to 34, the 2nd lowest reading since 1980.”
Jan Income unexpectedly rose .4% vs expectations of a decline of .2%. Income was boosted by “special factors” such as COLA increases and more pay to govt workers and military personnel. Excluding these and other special factors, Income rose .2%, still better than estimates. Spending rose .6%, .2% more than forecasted and with a .2% gain in the PCE, REAL spending rose .4%. As a result of the income #, the savings rate rose to 5% from 3.9%, and is now at the highest April ’95 and would still be in the 4%+ range even taking out the one time adjustment boosts to income. The savings rate is likely headed towards the 8-10% range and roughly speaking, for every 1% pt increase, its about $100b in less spending. This will be a painful process but a necessary adjustment for the long term health of our economy.