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After the latest Fed decision to engage in another round of quantitative easing, traders actually took the time to look at economic and corporate news and decided that maybe the financial and economic world is not so rosy after all. Still, economic news was mixed as shifts in sector strength continued with both pluses and minuses.
 Equities ended the latest week down. Stocks started the week on the downside as traders came off the euphoria of the prior week’s Fed move to implement a third round of quantitative easing. Focus returned to the economy and the Empire State manufacturing survey was notably negative, indicating that manufacturing is softening in the U.S. Losses were limited by Apple which hit another all-time high with demand for its new iPhone 5 exceeding initial supply. Stocks were mostly down Tuesday after FedEx (a bellwether company) cut its profit forecast. Helping to limit downdraft was a notably improved NAHB housing market index report, indicating further modest gains in housing.
At mid-week, stocks generally gained on favorable economic news. The Bank of Japan before open in the U.S. announced an increase in its asset-purchase target and existing home sales jumped significantly. These reports outweighed a less-than-expected gain in housing starts. Equities slipped Thursday on disappointing initial jobless claims and earlier released manufacturing reports from Europe and China. Numbers from Markit Economics’ PMI and Philly Fed had little impact.
Equities were little changed at week’s close despite news of bailout help for Spain and support in the tech sector from very strong advance sales of Apple’s iPhone 5. The positives were offset by worries about slowing in global growth.
Equities were down this past week. The Dow was down 0.1 percent; the S&P 500, down 0.4 percent; the Nasdaq, down 0.1 percent; the Russell 2000, down 1.1 percent; and the Wilshire 5000, down 0.6 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 11.1 percent; the S&P 500, up 16.1 percent; the Nasdaq, up 22.1 percent; the Russell 2000, up 15.5 percent; and the Wilshire 5000, up 15.7 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields declined notably this past week except on the short end which is still tied to a Fed induced extremely low rate and low volatility rate.
Rates drifted lower during the week. Monday was led down by a disappointing Empire State manufacturing report. Yields nudged lower Tuesday on continued worries about slowing economic growth. FedSpeak by New York Fed president William Dudley defending the latest Fed easing actually forced traders to focus on the economy’s sluggishness.
At mid-week, Treasury rates dipped despite a strong existing home sales number. Housing starts disappointed but not by a lot. Market sentiment simply continued to focus on a generally sluggish economy. After a flat Thursday, rates nudged further down Friday on continued concern about slowing global growth.
For this past week Treasury rates were down as follows: the 5-year note, down 4 basis points; the 7-year note, down 9 basis points; the 10-year note, down 11 basis points; and the 30-year bond, down 14 basis points. The 3-month T-bill was unchanged while the 2-year note edged up 1 basis point.
 The price of crude dropped significantly this past week. Crude dropped sharply in thin markets and on the expiration of October options. Markets for oil (and other markets) were thin due to the Jewish New Year holiday Rosh Hashanah. Crude continued to decline Tuesday after Saudi Arabian oil officials indicated that they would take action to boost output and lower prices. Also, a lowering of FedEx’s profit outlook weighed on prices. Spot West Texas Intermediate fell $3-1/2 per barrel at mid-week on news of a surge in oil inventories. Crude nudged back up marginally Thursday and Friday.
Net for the week, the spot price for West Texas Intermediate dropped $6.39 per barrel to settle at $92.61.
Recent trends continue. Housing is slowly regaining strength while manufacturing has softened.
 The economy is finally getting a modest boost from the sector that added the most to the recent recession. However, a distinction is needed for expectations for the latest starts number versus the actual trend. Expectations were not met for starts but there was a rebound in August and the mild uptrend continues. Housing starts in August advanced 2.3 percent following a 2.8 percent slip in July. The August starts pace of 0.750 million units fell short of the consensus projection of 0.768 million and is up 29.1 percent on a year-ago basis. Still, the actual number for August was an improvement.
For the latest month, the increase in starts was led by the single-family component which gained 5.5 percent after a 4.5 percent decline in July. This is a notable positive as recent strength has been in the multifamily component. Construction of single family homes was at the highest level in more than two years.
 For the latest month, the multifamily component declined 4.9 percent after a 1.3 percent gain the month before. However, this component is volatile, given that for a given project all units are included in that month’s starts when just a single unit is begun construction. The multifamily portion of housing likely is still moderately strong.
Housing permits eased in August after a moderately healthy July. Permits fell back 1.0 percent after a 6.7 percent rebound in July. The August rate of 0.803 million units came in essentially the same as analysts’ forecast for 0.802 million units. Basically, August simply came off a little from a relatively healthy July. The modest uptrend likely continues. Despite the disappointment relative to expectations, housing appears to still be in recovery, albeit a soft one.
 There is more good news on the housing front. Demand is picking up somewhat. Existing home sales rose strongly for a second straight month, up 7.8 percent in August to an annual unit rate of 4.82 million. This was the largest monthly percentage gain since last August and the highest rate since May 2010. All regions showed high single digit gains in the month.
Supply on the market, at 6.1 months at the current sales rate, remains tight and may be limiting sales. Supply was last this tight in January. Helping sales were soft prices with the median down 0.2 percent to $187,400. Since the price data are not based on repeat sales but merely shifting sample data, the dip in the median price likely means that sales shifted slightly toward the low end. Recent repeat sales price data from Case-Shiller and FHA indicate that home prices have been on a modest uptrend in recent months.
 The latest regional reports on manufacturing indicate that this sector is contracting. Empire State shows a worsening in contraction while Philly Fed indicates a less negative pace.
The Empire State general business conditions index fell more deeply into negative territory, to minus 10.41 for a second straight negative reading versus minus 5.85 in August. The new orders component was at minus 14.03 to signal significantly greater monthly contraction than August's minus 5.50. New orders first slipped into the negative column in July at minus 2.69. Unfilled orders, which have been shrinking all year, show their most severe rate of monthly contraction at minus 14.89. A partial offset to these order readings is an upturn in six-month expectations for new orders which is up nearly 15 points in the month to 17.02 for the best reading since May.
The Philly Fed report for September was mostly negative but there was one glimmer of hope for a turn around.
The general business conditions index improved but remained negative in September at minus 1.9, compared to minus 7.1 the month before. A very notable negative was a drop in shipments to minus 21.2 from minus 11.3 in August.
A gain for new orders was a positive signal from a downbeat report. New orders in the Mid-Atlantic manufacturing sector rose a sharp 6.5 points to plus 1.0 from minus 5.5 in August for the first positive reading since way back in May. A positive reading indicates monthly growth.
Regional manufacturing readings continue this coming week with Dallas Fed, Richmond Fed, and Kansas City Fed.
 Different manufacturing surveys have had slightly different biases relative other surveys and national measures of manufacturing activity. The Markit Economics PMI index has tended to be slightly more positive and this trend continued in September.
Growth in factory activity was modest and stable, according to the PMI manufacturing flash index from Markit Economics which was unchanged at 51.5. A modest but healthy rise in new orders, up five tenths to 52.4, led the details of the report. This reading showed two months of gains after hitting a recovery low in July at 51.0. But strength in new orders was centered in the domestic economy based on new export orders which, at 47.9, were below 50 for the fourth straight month to indicate monthly contraction. Another offset to the new order was the third contraction in four months for backlogs, but this should reverse if new orders keep coming in.
Other details include steady and moderate growth for production and for the sample's workforce, as well as slight and healthy inventory draws for both raw materials and finished goods. Price data show only the slightest pressure.
 For the near term, the prognosis for growth is not good. The index of leading economic indicators in August dipped 0.1 percent for the third contraction in the last five months. The decline for the ISM new orders index weighed most heavily on the August LEI. Consumer expectations were the second biggest negative.
A sustained positive was and will be the interest rate spread although the decline underway in long rates has reduced this component’s contribution to the leading index. This is counter intuitive as lower long rates will help economic growth. The leading index spread measure (10-year Treasuries rate minus fed funds) focuses on changes in the short-term rate as the key driver of change in the economy and does not consider the impact of lower long-term rates. The spread between the overnight fed funds rate and the 10-year Treasury rate has been narrowing and reducing the contribution to the LEI. But the contribution is still the strongest of any component.
Other data include a small 0.1 percent rise in the coincident index, down from 0.3 percent July but up from June's 0.2 percent decline.
The recovery continues but with shifts in sector strength. Housing is rising and manufacturing is softening. The Fed is giving a boost to the housing sector with purchases of mortgage-backed securities but the marginal impact is likely slight compared to pre-QE3.
Most key sectors get updates this week. With manufacturing slowing down, investors will be looking to the latest reading on durable goods orders along with regional Fed reports from Dallas, Richmond and Kansas City. Consumer sector strength will be assessed in the personal income and spending report along with both consumer confidence and sentiment. Confirmation of recent positive housing reports will come from data on new home sales and pending existing home sales. Finally, the third estimate for second quarter GDP is released but likely will be seen as old news.
The Chicago Fed National Activity Index in July came in at minus 0.13 versus June's revised minus 0.34. Despite the improvement in July, the 3-month average fell but only slightly to minus 0.21 from June's revised minus 0.18. This is the fifth straight sub-zero reading for the average.
No consensus available
The Dallas Fed general business activity index in its Texas manufacturing survey improved but remained in negative territory, posting at minus 1.6 versus minus 13.2 in July. The production index, a key measure of state manufacturing conditions, fell from 12.0 to 6.4, suggesting softer growth in output. The new orders index eased to 0.2 from 1.4 in July, barely remaining in positive territory.
Dallas Fed general business activity index Consensus Forecast for September 12: 0.5
Range: 0.0 to 1.0
The S&P/Case-Shiller 20-city home price index (SA) reported a 0.9 percent rise in June for its 20-city index which followed a robust 1.0 percent gain the prior month. The latest reading was the fifth rise in a row and the fourth very strong rise in a row. The year-on-year rate, at plus 0.5 percent, showing its first positive reading in nearly 2 years. Gains swept 18 of the 20 cities led by a sharp rebound for Detroit and a third straight monthly rebound for Atlanta. West Coast cities also show strong gains.
The S&P/Case-Shiller 20-city HPI (SA, m/m) Consensus Forecast for July 12: +0.9 percent
Range: +0.2 to +1.9 percent
The S&P/Case-Shiller 20-city HPI (NSA, m/m) Consensus Forecast for July 12: +1.7 percent
Range: +1.4 to +2.5 percent
The S&P/Case-Shiller 20-city HPI (NSA, y/y) Consensus Forecast for July 12: +1.2 percent
Range: +0.8 to +1.5 percent
The Conference Board's consumer confidence index was down 4.8 points in August to a 60.6 level. Weakness in the latest report was centered in the assessment of future conditions which makes up 60 percent of the composite index. One relative positive in the report was stability in the assessment of current conditions, which points to stable monthly readings for August economic data including jobs data. Those saying jobs are currently hard to get actually eased slightly to 40.7 percent which was just a little bit better than it's been since April.
Consumer confidence Consensus Forecast for September 12: 64.8
Range: 61.5 to 68.0
The FHFA purchase only house price index in the report for June extended a run of gains including a 0.7 percent rise for June. Year-on-year, the index was up 3.6 percent, which was slightly lower than May's upward revised 3.8 percent but otherwise well above prior months.
FHFA purchase only house price index Consensus Forecast for July 12: +0.8 percent
Range: +0.5 to +1.0 percent
The Richmond Fed manufacturing index for August posted at minus 9 indicating monthly contraction in general activity though at a less severe rate than July's minus 17 reading. Less severe contraction is about the only good thing that can be said in this report with new orders, at a very weak minus 20, only a bit improved from July's minus 25. Backlog orders also showed slightly less severe contraction.
Richmond Fed manufacturing index Consensus Forecast for September 12: -4
Range: -10 to -2
New home sales were up 3.6 percent in July to an annual unit rate of 372,000. This is the best of the recovery outside of stimulus driven sales in the spring of 2010.
The rise in total sales is drawing down supply, which explains the very strong readings in the monthly home builders' housing market index. Supply at the current sales rate was 4.6 months which was down from 4.8 months in June and compares with 6.7 months a year ago.
New home sales Consensus Forecast for August 12: 380 thousand-unit annual rate
Range: 365 thousand to 400 thousand-unit annual rate
Durable goods jumped 4.1 percent in July on top of a 1.6 percent jump in June. But when looking at orders excluding transportation equipment the story was one of softness with the reading at minus 0.4 percent following a downwardly revised minus 2.2 percent result in June. Civilian aircraft orders surged a monthly 53.9 percent in July following a 32.5 percent surge in June. But also part of the July gain for transportation equipment were motor vehicle orders which jumped 20.6 percent following a 1.8 percent dip in June. Numbers reflect revisions from the more recent total factory orders report.
New orders for durable goods Consensus Forecast for August 12: -5.0 percent
Range: -9.4 percent to -1.1 percent
New orders for durable goods, ex-trans., Consensus Forecast for August 12: +0.2 percent
Range: -1.9 percent to +0.7 percent
GDP growth for the second quarter for the second estimate was revised up to 1.7 percent annualized, compared to the initial estimate of 1.5 percent and to 2.0 percent in the first quarter. The mix of component revisions was mostly favorable. The upward revision was due to higher estimates for personal consumption, nonresidential structures, and exports. Also, import growth was revised down and government purchases fell less than previously estimated. Pulling down on the second revisions were lower estimates for growth in equipment & software, residential investment, and inventories. The downward revision to inventory growth was notable in that businesses are keeping stocks under control. Economy-wide inflation according to the GDP price index was unrevised at 1.6 percent annualized. The median market forecast was for 1.6 percent.
Real GDP Consensus Forecast for third estimate Q2 12: +1.7 percent annual rate
Range: +1.5 to +2.0 percent annual rate
GDP price index Consensus Forecast for third estimate Q2 12: +1.6 percent annual rate
Range: +1.6 to +1.6 percent annual rate
Initial jobless claims for the September 15 week were down only 3,000 to a 382,000. The September 8 week was revised to 385,000 with roughly half of the week's 18,000 jump due to Hurricane/Tropical Storm Isaac.
Jobless Claims Consensus Forecast for 9/22/12: 376,000
Range: 372,000 to 385,000
The pending home sales index rebounded 2.4 percent in July, following a 1.4 percent dip the month before. The latest gain points to further improvement for existing home sales. The year-on-year rate of plus 12.4 percent is the highest in nearly 2-1/2 years. Regional data show gains in 3 of 4 regions led by the South which is the largest region. Sales of existing homes have been trending higher for the last year though gains have been slightly lagging those for new homes.
Pending home sales Consensus Forecast for August 11: +0.3 percent
Range: -1.5 to +3.0 percent
The Kansas City Fed manufacturing index in August posted at 8, up from 5 the prior month. Other indicators also were somewhat positive as the production index showed slightly stronger growth at 7 versus 2 in July. Shipments jumped to 12 in August from minus 3 the month before. The new orders and backlog index point to some pick up in forward momentum. New orders increased to 11 from minus 4. Backlogs gained to 4 from minus 10. However, the strength in new orders appears to be related to domestic demand as the export orders remained negative at minus 6 versus minus 13 in July.
Kansas City Fed manufacturing index Consensus Forecast for September 12: 5
Range: -2 to 9
Personal income in July advanced 0.3 percent, matching the revised boost the prior month. The wages & salaries component, however, eased to a 0.2 percent rise from 0.4 percent in June. Consumer spending had softened in May and June and began to create worries about the recovery faltering. mportantly, the consumer made a comeback in July in the retail sector. Consumer spending increased 0.4 percent in June, following no change in June. Turning to inflation, weak energy costs (at least in July) weighed on headline inflation which was unchanged, following a 0.1 percent uptick in June. The core rate also was flat in July, following a 0.2 percent boost in June.
Personal income Consensus Forecast for August 12: +0.2 percent
Range: +0.1 to +0.3 percent
Personal consumption expenditures Consensus Forecast for August 12: +0.5 percent
Range: +0.3 to +0.8 percent
PCE price index Consensus Forecast for August 12: +0.5 percent
Range: +0.1 to +0.6 percent
Core PCE price index Consensus Forecast for August 12: +0.1 percent
Range: +0.1 to +0.2 percent
The Chicago PMI remained in positive territory although with minor slippage as the composite index posted at 53.0 in August, compared to 53.7 the prior month. Importantly, the prospects for the Chicago-area economy picked up in August as the new orders index advanced 1.9 points to 54.8 to show the strongest monthly growth of the last 4 months.
Chicago PMI Consensus Forecast for September 12: 53.0
Range: 50.2 to 54.0
The Reuter's/University of Michigan's consumer sentiment index in early September was up a very sharp 4.9 points to 79.2. This is just about the best reading of the year. The gain was concentrated entirely in the expectations component which was up 8.3 points to 73.4 which was also just about the best reading of the year. A separate reading on the 12-month outlook also jumped, up 15 points to 88. The current conditions component showed little change, edging four tenths lower to an 88.3 level that is also, despite the dip, just about the best level of the year.
Consumer sentiment Consensus Forecast for final September 12: 79.0
Range: 75.0 to 81.5
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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