Fed Talk is Cheap

By The Greek:

Stocks were higher Wednesday despite a sharp downward revision to Q1 GDP and another report of decreased mortgage activity on spiking interest rates. The catalyst for stocks was some soft comments from Minneapolis Federal Reserve Bank President Kocherlakota and others. Well, talk is cheap; the action of the Federal Reserve to pull away its asset purchase programs prematurely speaks louder than words. As a result, I do not expect this latest support to hold unless it is followed by a change in policy.

Security	June 26 Change
SPDR S&P 500 (NYSE: SPY)	+1.0%
SPDR Dow Jones (NYSE: DIA)	+1.0%
PowerShares QQQ (Nasdaq: QQQ)	+0.9%
Bank of America (NYSE: BAC)	+0.7%
iShares Dow Jones US Real Estate (NYSE: IYR)	+1.5%

How desperate must traders be to be bidding up stocks on some contradictory comments from a regional Federal Reserve Bank representative when the truth about the economy shows it’s not as secure as the FOMC believes it to be?

The Truth

First quarter GDP was revised significantly lower this morning in its third revision, which usually does not bring with it major change. I’ll leave it to the reader to run the regression analysis to prove this, and trust in my own observations over the last lifetime on this one. GDP is revised several times, and so by the third revision not much change is typical. Yet, Q1 GDP was cut to 1.8% growth from its recent reporting at 2.4% (that is a big difference for the mathematically challenged). The revised growth rate is consistent with the expectations of the World Bank and Conference Board for the U.S. economy this year, but less perfectly matched with the latest Fed view for 2.3% to 2.6% growth. Furthermore, judging by the trend over the last three Fed prints on this, the Fed’s economic forecast will be cut to 2.0% to 2.6% at next printing, in my view. Eventually, it might even make sense.

In its economic report the government stated: ”The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, real GDP increased 2.4 percent. With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was less than previously estimated, and exports and imports are now estimated to have declined.”

Add to that sour news the fact that mortgage rates spiked even higher last week, as reported by the Mortgage Bankers Association (MBA) today. For the week ending June 21, the MBA indicated that its Market Composite Index for mortgage activity fell by 3.0% to its lowest level since November 2011. Mortgage rates spiked last week after the Federal Reserve’s press conference announcing the tapering plan for the asset purchase programs. Here’s what happened to rates in the latest week:

Mortgage Loan	Rate	Change
30-Yr. Fixed Conventional	4.46%	+29 Basis Points
30-Yr. Fixed Jumbo	4.52%	+29 BPS
30-Yr. Fixed FHA Sponsored	4.20%	+35 BPS
15-Year Mortgage	3.55%	+25 BPS
5/1 ARMS	3.06%	+25 BPS

Perhaps not so surprisingly, Purchase Activity actually increased in the latest reported period, as some buyers on the fence rushed to lock in as low a rate as they could. Some believe rising rates will increase mortgage activity, and while I agree this could be a short-term phenomenon, it will not be a long-lasting sustainable economic positive or a catalyst for growth in the housing market.

So why then are stocks rising counter to intuition?

Fed Speak

Minneapolis Federal Reserve Bank President Narayana Kocherlakota wanted to clarify what he thought was a misinterpretation of the market since the FOMC Monetary Policy release and press conference. So on June 24, he published this clarifying statement and held a conference call to discuss the issue. He also appeared on CNBC this morning to discuss the issue, where I believe he caught the market’s attention.

President Kocherlakota’s statements were meaningful, mostly because they seem to give the Fed an out of this horrible trajectory it has decided on. The fact that this event occurred showed that there is some pressure on the Fed today about how markets have digested the message. Therefore, it may eventually react to stop the trend in mortgage and interest rates, hopefully in time to stop serious economic damage. But until it does, none of this matters.

The market believes the Fed is acting prematurely and taking away a critical support from the real estate recovery and from the still vulnerable economy. Interest rates will continue to rise as a result and the Fed thus destroys its own economic work. Talk is cheap, and actions speak louder than words. So the Fed should accept that the efficient market has spoken and that it was a mistake to taper asset purchase programs over the near-term, period.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Consumer Confidence Will Dive When 401K Statements Arrive

By The Greek:

The Conference Board reported that consumer confidence soared in June to a five-year high, but be careful, as this is only sustainable until passive investors receive their 401K statements next month. The consumer mood is greatly shaped by the personal wealth perspective.

The Conference Board reported the Consumer Confidence Index jumped to 81.4 in June, up from 74.3 in May. Some of the gain was due to improvement in the Present Situation Index, which rose to 69.2, from 64.8. However, a good portion of the improvement came on a gain in the Expectations Index, which improved greatly to 89.5, from 80.6.

I’m always wary of gains driven by expectations, as they are built on hope more than substance, and so can disappear as quickly as they come. In this case, that’s exactly what I expect to happen in a few weeks when passive investors across corporate America receive their 401K statements. The statements will show a disruption in the returns they had grown used to recently. Such disruption is especially important because Americans feel confident when they feel wealthy, as evidenced by the “wealth effect,” which is most often related to real estate values.

Market Security	June-to-Date	Year-to-Date
SPDR S&P 500 (NYSE: SPY)	-3.4%	+11.4%
SPDR Dow Jones (NYSE: DIA)	-3.0%	+13.3%
PowerShares QQQ (Nasdaq: QQQ)	-4.5%	+7.7%

As you can see, stocks have not done well in June versus the returns investors had gotten used to this year and last. Yet, consumer relative shares are higher today on the consumer confidence news, with the two top retailers online and on the street, Amazon.com (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT), up 0.1% and 0.5%, respectively today. Each of the two stocks has had a good run through the economic recovery of the last couple years. Furthermore, both Amazon.com (AMZN) and Wal-Mart (WMT) have benefited from offering lower cost goods into a still laboring economy.

Chart at Yahoo Finance

A second bit of retail data reached the wire today as well. The International Council of Shopping Centers (ICSC) reported its Weekly Chain Store Sales data. For the period ending June 22, same-store sales rose 1.1%, versus the prior week increase of 0.3%. On a year-to-year basis, sales were up just 1.6%, versus the prior week’s yearly gain of 2.5%. While inflation is low now, these growth rates are only just barely meeting rising prices, and that is not a sign of health, though possibly a good sign for Wal-Mart and Amazon.com, which cater to value shoppers.

For economists and market enthusiasts, the takeaway from the Consumer Confidence Index should be that this might not last given the new paradigm the Fed has laid out for stocks. In my weekly report at my blog, I warned investors to beware of dated data this week, which would provide false comfort to markets. This data point is not one of those as it is measuring a current period, but it is at risk of change near-term due to the likely change in consumer mood that should come with altering perspectives of personal wealth as 401K reports are received. So, in conclusion, I advise those made confident by today’s report to temper their enthusiasm.

Retail Relative Securities	June 25 Change 3:20 PM ET
SPDR S&P Retail (NYSE: XRT)	+1.8%
Consumer Discretionary SPDR (NYSE: XLY)	+0.9%
Macy’s (NYSE: M)	+1.1%
J.C. Penney (NYSE: JCP)	+4.0%
Nordstrom (NYSE: JWN)	+2.2%
Kohl’s (NYSE: KSS)	+1.8%
Sears (Nasdaq: SHLD)	+0.1%

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Fed Monetary Policy Release

Fed Monetary Policy

This is the verbatim release from the FOMC

Release Date: June 19, 2013

For immediate release

Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was James Bullard, who believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

Security Reactions	2:20 PM ET Wednesday
SPDR S&P 500 (NYSE: SPY)	-0.4%
SPDR Dow Jones (NYSE: DIA)	-0.4%
PowerShares QQQ (Nasdaq: QQQ)	-0.3%
SPDR Gold Shares (NYSE: GLD)	+0.2%
iShares Silver Trust (NYSE: SLV)	+0.3%
iShares Barclay TIPS Bond (NYSE: TIP)	-0.5%
PowerShares DB USD Bullish (NYSE: UUP)	+0.5%
Financial Select Sector SPDR (NYSE: XLF)	-0.4%

Hooked on Economic Happy Pills

Before U.S. markets opened Tuesday, markets across Europe and Asia were already markedly lower. It’s because equity investors hooked on central bank stimulants want more and more to stay high. We received two bits of information Tuesday that reinforce this argument. But as I reviewed the economic data from Japan and Germany, I see the dealers still serving us. It’s just that we seem to want and need more and more, as we are hooked on happy pills.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

The Bank of Japan (BOJ) issued its latest monetary policy Tuesday, and it was full of colorful pills for our addicted markets to swallow. The BOJ’s statement shows all sorts of creative economic engineering efforts in an asset purchase program that makes our Federal Reserve’s efforts look simple.

The BOJ is doing more than buying treasuries, and it has gone beyond the buying of mortgage backed securities (MBS) like our Fed. The BOJ is buying treasuries, yes, but it’s also buying ETFs and Japanese REITs. Imagine if our Fed were buying the shares of mortgage REITs like Annaly Capital (NYSE: NLY) and American Capital Agency (Nasdaq: AGNC). It goes a step beyond the controversial effort our Federal Reserve is applying, and is bringing leverage into central banking. The BOJ is also buying corporate bonds, tying the economy into one big knot that it may not be able to untie quickly enough someday.

Yet, equities across the globe were bothered Tuesday, because of concern about not enough being done. Investors wanted to see the BOJ buying longer dated securities. In other words, junkie investors want a higher high, because they think this one is not enough. I would have to disagree. These are extraordinary measures that show desperation and introduce risk to at least the Japanese, and probably the rest of us if they are accepted into the toolbox of central banks globally. It’s like our Fed efforts in MBS were a stepping stone drug into the much more dangerous cocaine and methamphetamines being used in Japan. What will come next, the economic equivalent of dangerous new “bathing salts”? I am unsettled inside about it all. We are getting hooked on economic happy pills, and it is unnatural and dangerous.

Meanwhile, the global junkie is worried today that German logic could kill the party. The German Constitutional Court is reviewing whether recent European Central Bank and other euro area crisis management measures are legal in Germany. One of those measures is ECB bond purchases, which was critical in turning the tide for stocks in Europe. So, investors see this German debate as a threat to their supply. Druggies do not fret, though, because the Germans cannot afford to cut you off.

Look at how this economic mayhem has affected markets today:

Market Security	Through 10:00 AM ET
SPDR Dow Jones (NYSE: DIA)	-1.0%
SPDR S&P 500 (NYSE: SPY)	-1.0%
PowerShares QQQ (Nasdaq: QQQ)	-1.1%
iShares S&P Europe (NYSE: IEV)	-1.2%
iShares S&P Asia 50 (NYSE: AIA)	-1.5%

Friends, we are hooked on economic happy pills. Instead of seeking higher highs, we need to find natural ways to make us happy, through fiscal policies that reinforce economies. Improved trade & tax laws and the better containment of runaway funds are a start. We may yet get there, but we are currently caught in the middle of an economic drug war, and we have to get some help to cure this addiction.

Like this report? See more at www.WallStreetGreek.com.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Recession Alarm! Inventory Build at the Wholesale Level

By Markos Kaminis

The week offered up a worrisome economic data-point that was mostly brushed aside by the popular press, but was noted here. There was an alarming inventory build at the wholesale level, which could be indicative of an abrupt drop off of demand for goods. Given the recent deterioration seen and documented here in other data, this economic warning should not go unnoted or unnoticed.

The economic data schedule for Thursday produced the latest Wholesale Trade Report. In this report for the month of March, wholesale inventories rose 0.4%, matching economists’ expectations and bettering the 0.3% decline of the month before. The result would have been welcomed if not for one important bit of information, also found within the report.

To really understand this data, we must compare the change in inventory to the monthly change in wholesale sales. Unfortunately, wholesale sales fell 1.6% in March, which is negative in and of itself, unless influenced by high-ticket durable goods or price fluctuation.

A closer look at the data only caused me more concern, outside of auto industry activity. Ford (NYSE: F) and GM (NYSE: GM) can rest somewhat easy for now, as month-to-month auto sales growth of 1.7% exceeded auto inventory growth of 1.2% in March. Another good sign for housing and for companies like Pier 1 Imports (NYSE: PIR) and Ethan Allen (NYSE: ETH) came in furniture sales growth of 0.6% versus inventory growth of 0.2%.

Economists and those in the corporate sector should feel uneasy, though, given that professional equipment sales declined by 1.0% as inventory slipped just 0.3%. Perhaps there’s more for Apple (Nasdaq: AAPL), IBM (NYSE: IBM) and Dell (Nasdaq: DELL) shareholders to worry about as well, given that computer equipment sales fell 0.9%, and relative inventory also declined by 1.0%.

This data does not measure manufacturing, which I have been pointing to as a key concern of late. However, both hardware and machinery segments noted significant declines in sales even as inventory increased sharply. This is an area of concern, because it measures durable goods with long lead times from order to delivery, and if inventory is building without sales, it could reflect an abrupt drop in the demand for goods at the end market. Hardware sales fell 1.6% as inventory rose 2.1%, and machinery sales fell 1.5% as machinery inventory rose 1.2%. Metals sales also fell sharply in March, dropping 2.5%, as inventory edged up 0.3%. I believe this is a sign that recent issues at companies like Caterpillar (NYSE: CAT) probably extend more broadly to many other firms.

Considering that inventory continued to grow as sales fell, the inventory-to-sales ratio rose in unhealthy fashion to 1.21, from 1.19 in February. What was especially concerning to me, though, was that nondurable goods sales fell 2.5%, as inventory rose 0.1%. There was weakness in petroleum that could have been effective price affected, but there was also softness in paper and apparel, which might reflect important softness in consumer demand further down the channel.

Investors were not oblivious to the news, as the SPDR S&P 500 (NYSE: SPY) fell 0.4% and the SPDR Dow Jones Industrial Average (NYSE: DIA) declined 0.2%, but those moves were off of recent strength post the jobs report of last Friday; stocks were due for a break in my view. Remembering that employment remains a lagging indicator, and that a good deal of undocumented unemployment continues to plague our economy, we should be skeptical of recent euphoria and wary because economic issue is apparent. Find more of our value-added insights at our blog’s home page.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Recession Signal - This Consumer Data is Alarming

By The Greek:

Bloomberg’s Consumer Comfort Index showed improvement today, but the abrupt change in the weekly measure is deceptive and perhaps simply influenced by pleasant weather in the population dense Northeast U.S. The index, while still deeply in negative territory, still reflects a troubled state of affairs. Furthermore, recent monthly measures of consumer sentiment have clearly shown cause for alarm, and for good reason.

Bloomberg’s Consumer Comfort Index improved for the week ended April 14 to a mark of -29.2. The magnitude of the 4.8 point improvement was unusual, only seen about 1.8% of the time. The gain was the biggest seen since December 2011, and the absolute value of the index was the highest it has been in five years. But there was a divergence in the groups of Americans measured, with lower income Americans remaining depressed. Considering that the real unemployment rate could be as high as 11.9% and real underemployment could reach 17.8%, this is an important segment of the nation today, and bigger than the government estimates.

Because of the divergence in wealth segments, I suspect the improvement could simply be the result of warmer weather in the Northeast. Obviously, I cannot prove this, but the cherry blossoms are blooming on 81st Street outside my window, and a pleasant feel fills the air.

Three component measures of the index gained last week, and the Personal Finances measure actually moved above the waterline. The tragic state of affairs is apparent nonetheless in the fact that most of the measures remain in deeply negative territory, with the index range from +100 to -100.

Component	Level
Personal Finances	+1.6
Current View of Economy	-54.7
Good Time to Spend	-34.6

Further evidence of the way consumers really feel today was provided by the most recent monthly measures of consumer sentiment. The Thomson Reuters/ University of Michigan Consumer Sentiment Index, reported last Friday, showed the index fell to a nine-month low in April. The measure of the consumer mood fell 6.3 points, to 72.3, the lowest it has been since July 2012. It caught economists by surprise, with the consensus forecast set at 78.5, according to Reuters.

Not long before Reuters’ reported on it, the Conference Board reported its Consumer Confidence Index for March dropped precipitously by 8.3 points to a mark of 59.7. Most of the decline was measured in expectations, which I have proposed in the past were raised after the U.S. government passed its debt ceiling and fiscal cliff tests. Those moves allowed stocks to rise in the first quarter, including consumer shares.

Security	Q1 2012
SPDR S&P 500 (NYSE: SPY)	+10.5%
SPDR Dow Jones (NYSE: DIA)	+11.9%
PowerShares (Nasdaq: QQQ)	+6.1%
Consumer Discretionary SPDR (NYSE: XLY)	+12.0%
SPDR S&P Retail (NYSE: XRT)	+12.8%

However, the declines seen in the monthly measures of the consumer mood probably better reflect reality, considering hopes were built on expectations and not the views of consumers about the present situation. What’s weighing on them today was verified to me by the simple statement of a simple friend, a gentlemen maintenance worker at my church, who said, “I don’t like Obama anymore.” I asked Vangelis why and he responded, “Because my taxes went up.”

The expiration of the payroll tax break was a failing of the government with regard to the fiscal cliff, and is weighing today on an already stressed American consumer. Furthermore, those 7.7 million Americans we are not counting today as part of the labor force are not employed (including the retirees), except for possibly undocumented work doing things like dog walking and odd jobs for cash. Such means of making a living is not going to inspire them to shop much. This situation must result in lighter consumer spending, and therefore, a slower pace of GDP growth. Indeed, even the Federal Reserve said a 1.5 percentage point drag could be expected for GDP this year because of the Sequester Spending Cuts and the payroll tax break expiration. Yet the Fed failed to include its own admission in its forecast this past March. This means a surprise could be in store when GDP is reported.

Retail Sales, reported for March last Friday, showed sales excluding autos and gasoline fell by 0.1%. Major retailers are no longer reporting their monthly same-store sales, and even that is indicative of bad times. Public companies are all the more likely to share good news and to keep bad news quiet if they can. The trend of many now joining the major names like Wal-Mart (NYSE: WMT) in refraining from such reporting could be an omen of a tough quarter ahead. The market share gains of discounters and bargain web retailers, like Amazon.com (Nasdaq: AMZN), Wal-Mart, Target (NYSE: TGT) and Costco (Nasdaq: COST) are indicative of the erasable era we live in. But what is troubling me most today is that these latest consumer mood measures show that how consumers really feel is alarming, and economic recession is all the more possible because of it.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Ignore the Economic Message at Your Own Risk

By The Greek:

Over the course of the last several weeks and months I’ve been noting and reporting on a changing economic message. I brought attention to how the Federal Reserve and the market have ignored that message. But, the economic message is getting harder to ignore. Today, two more data points further pounded in the message that the economy is not as healthy as the Fed, the White House and the market would have you believe.

Over recent weeks, I said we might even be ignoring the signs of a coming recession, given Europe’s linchpin Germany has fallen into it; jobless claims in the U.S. were on the rise; and the latest GDP data was not sizing up to par. Before that I noted that the severe drop-off of consumer sentiment was a recession signal, and probably the result of high hopes on the passage of political ploys and on stock market flows. Before that, I was anticipating a downgrade of the economic outlook by the Federal Reserve, given its own discussion indicating so, but when the Fed published its revised forecast in March, the Fed’s math simply did not add up.

Despite the market’s ignorance to the economic signals, I suggested it might be time to Sell the SPY, or the SPDR S&P 500 (NYSE: SPY) at the close of Q1. Finally, over recent weeks we have seen a question raised in the trading of stocks and the ETFs measuring them like the SPDR Dow Jones Industrials (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ). We’ve seen real evidence as well in the forecasts and actions of cyclical companies like Caterpillar (NYSE: CAT) for instance. I’ve noted several times that Q1 EPS estimates have been reduced significantly over the course of the first quarter. There are still factors working in favor of stocks like capital flows into equity funds, but I believe those are tiring now or will tire as evidence mounts against the economy.

Today, Weekly Initial Jobless Claims and the Challenger Job-Cuts Report each offered a tough chew. Weekly claims for the period ending March 30, reported today, increased by 28K and reached 385K. That’s dangerously close to that psychology threshold of 400K almost overnight. The four-week moving average for the data point increased by 11,250, and rose to 354,250. The meaningful change in the moving average reflects a significant change in the economic direction.

The Challenger Gray & Christmas Job-Cuts Report showed that announced corporate layoffs increased 30% against the prior year comparable period. March job cuts totaled 49,255 in the period. It was the second straight month and the fourth in the last six to show poorly against last year. It likewise marks a change in economic trend, and it cannot be ignored. Retailers led March downsizing, with Sears (Nasdaq: SHLD) and its Kmart unit, as well as Best Buy (NYSE: BBY) and J.C. Penney (NYSE: JCP) reducing workforce. Blockbuster closed down altogether. That reflects poorly on consumer spending and the condition of Americans generally, despite the real estate recovery and stock market gains.

The market can only ignore the economic message for so long. It is being pounded in now, with the ISM Manufacturing Index also weighing on us this week. Economists with cautious views have born a cost with momentum driven market mavens coming down critically upon them. However, this market voice, which also offers an economic perspective, has given you the full picture for stocks and the economy, and at times the two have diverged. Can you understand that message? The comments that follow below here will show mostly a perspective based on simply the title of this article, but you who have read through have understood the message and I welcome you to continue receiving it.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Why the Week’s 4.7% Same-Store Sales Growth is Misleading

By The Greek:

It sounds fantastic! Retailers reported weekly same-store sales increased by 4.7% week-to-week in the period ending March 30. That is great news right? No, it’s not, and here’s why.

The International Council of Shopping Centers (ICSC) reported same-store sales rose 4.7% week-to-week in the March 30 period. On a year-over-year basis, sales were up 1.9%, though Redbook saw the yearly comparison for the period even better, at plus 3.5%. Perhaps readers suspect we might pooh-pooh the news by attributing the sales growth to discounters like Wal-Mart (NYSE: WMT) or to online sellers like Amazon.com (Nasdaq: AMZN), due to their stealing of market share from the Macy’s (NYSE: M) and J.C. Penney’s (NYSE: JCP) of the world. No, that’s not it. So what’s wrong with the numbers then?

Well, a peak at the prior week’s results offers a clue. In the week ending March 23, the ICSC reported same-store sales were down 1.7% week-to-week. The yearly comparisons were likewise poor, with sales only 1.0% higher according to the ICSC and 2.6% higher according to Redbook. The reason is really rather simple.

It’s about the Easter holiday and where it sits on the calendar this year versus last year. This year, Easter fell on March 31st, and last year it fell on April 8th. Sales were strong in the week of Easter and Passover because of the surge of seasonal sales tied to the holidays, not all of which are accounted for perfectly. Consider all the flowers 1-800-Flowers.com Inc. (Nasdaq: FLWS) sells and all the Easter Baskets CVS Caremark (NYSE: CVS) sells, all the Easter Bonnets Macy’s (M) sells and all the new dresses J.C. Penney (JCP) sells. Let’s not forget the Easter and Passover meals that lead families to gather together, and the necessary shopping at Kroger’s (NYSE: KR) and Whole Foods Market (NYSE: WFM).

For this reason sales picked up in the week before Easter as they do every year. From this understanding, we garner insight about next week as well, because last year the week incorporated Easter shopping and this year it will not. Thus, these same-store sales reports should show poor comparable results on a weekly and yearly basis when reported next Tuesday.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.