Continuing our Daily Saut report, which is, in our opinion, the most reasonably stated bull case extant. This is of course in contrast to David Rosenberg who continues to make the case that the economy is punk, therefore the market dangerous.
Saut: Yesterday's economic reports showed weakening manufacturing data with the PMI falling to 52.0 from 54.6 versus the consensus call of 53.9. The shortfall was due to declining new orders, employment and output, making one old Wall Street Wag comment, "When stocks ignore bad news, that's good news!" March new home sales, however, rose 1.5% MoM to an annualized run rate of 417,000 versus February's 411,000. Moreover, existing house prices are better by 12% YoY. Keep in mind that is hugely positive for consumer net worth, consumer confidence, and business confidence. And what the stock market is doing only amplifies those improving net worth trends. Yesterday's action lifted the S&P 500 (SPX/1578.78) back above its 10-DMA, making last week's test of its 50-DMA look successful. Tuesday's Triumph left the SPX with a strong move above 1562, and thus in a position to trade to a new all-time high since the daily internal energy of the stock market is now rebuilt on a daily basis. While the market's weekly energy levels are continuing to build towards a fully loaded level, the daily's level should be enough to lift stocks higher.
Rosie, 3/19: Make no mistake... growth is weakenrng. We see it in China. Russia is caught in the throes of a five-quarters-in-a-row slownown. European car sales are down 10% from year-ago levels. Unemployment in the U.K. is rising at its fastest pace in a year as the jobless rate drifts hack up towards 8%. In the US. we have the NY Empire and Philly Fed combined pointing to a 48 ISM reading for April - the manufacturing renaissance story is losing some of its lustre. Single famiiy starts dropped 4.8% in March and the April NAHB index slumped to a six-month low - the bloom is off the housing market's rose, a view bolstered by the 10% correctlon of late that we have seen in lumber pnces. And the coincident indicator of economrc actnnty nudged dorm 0.1% in March, the second drop in the past three months. In fact the coincident indlcator contracted 3% at an annual rate over the past three months - the last time It happened was July 2009.