Succinct Summation of the Week’s Events:
Positives:
1. Markets rallied after last week’s volatility, with broad indices gaining 4-6%, the biggest weekly gains since 2013;
2. Eurozone economy was confirmed to have grown by 2.7% year over year in Q4, capping the best year of growth since 2007
3. NAHB housing index was unchanged at 72 as expected. NAR said builders had to balance their enthusiasm over tax reform and regulatory relief but with the reality of the marketplace.
4. Philly regional index saw a gain of 3.6 pts m/o/m to 25.8 and that was 4 pts above the forecast. The internals were also better off weakness in January.
5. US business inventories in December rose .4% m/o/m for a 2nd straight month. As sales rose by a similar amount the I/S ratio was unchanged.
6. NFIB small business optimism index for January rose 2 pts to 106.9 after falling by 2.6 pts in December. Current Compensation component was up by 4 pts to 31%, matching the highest also in 17 years. This could add to upward wage pressures.
7. Total aggregate financing in China in January was robust at 3.06 Trillion yuan but that was a bit less than expectations of 3.15 Trillion.
Negatives:
1. NY Fed’s Underlying Inflation Gauge said January inflation is at 3.0% vs 2.94% in December, a level last seen in 2006.
2. CPI for January rose .5% headline which was 2 tenths more than expected and off a higher base as December was revised up by one tenth.
3. January PPI rose .4% m/o/m as expected while the upside surprise was seen ex food and energy. The core rate was also up .4% m/o/m vs the forecast of up .2%.
4. Mortgage rates rose to the highest level in 4 years at 4.57% did catch up to mortgage applications. Purchases fell by 5.9% w/o/w and the y/o/y growth rate slowed to 4.2%. Refi’s fell by 1.9% but are still up by 2.8% y/o/y as those looking to refi better hurry up.
5. Industrial production in January fell .1% m/o/m instead of rising by .2% as forecasted.
6. Core rate of retail sales (ex auto’s, gasoline and building materials) was unchanged in January m/o/m vs the estimate of up .4% and December was revised down by 5 tenths.
7. Initial jobless claims rose 7k to 230k and that was 2k more than expected. The 4 week average rose 4k to 229k off the lowest level since 1973.
