Sell Gold Miners – They're Levered to the Gold Collapse Catalyst

Gold prices should suffer a setback if the Federal Open Market Committee (FOMC) dot-plot economic forecasts show Fed-member expectations for rate hikes this year. The market has priced out that possibility and therefore would have to adjust to it, which I believe results in a sharp move higher for the dollar and a collapse in gold prices. Gold miners are naturally levered to gold prices, as their profitability depends on it. Thus, I have taken a short position in the recently enriched Market Vectors Gold Miners ETF (NYSE: GDX). I suggest holders of the GDX sell it now. See the full report: Sell Market Vectors Gold Miners ETF (NYSE: GDX) - Levered to Gold Collapse Catalyst.

DISCLOSURE: Kaminis is short GDX. 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. Article should interest investors in SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY), PowerShares QQQ Trust (Nasdaq: QQQ), ProShares Short Dow 30 (NYSE: DOG), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Ultra QQQ (NYSE: QLD), NYSE Euronext (NYSE: NYX), The NASDAQ OMX Group (Nasdaq: NDAQ), Intercontinental Exchange (NYSE: ICE), E*Trade Financial (Nasdaq: ETFC), Charles Schwab (Nasdaq: SCHW), Asset Acceptance Capital (Nasdaq: AACC), Affiliated Managers (NYSE: AMG), Ameriprise Financial (NYSE: AMP), TD Ameritrade (Nasdaq: AMTD), BGC Partners (Nasdaq: BGCP), Bank of New York Mellon (NYSE: BK), BlackRock (NYSE: BLK), CIT Group (NYSE: CIT), Calamos Asset Management (Nasdaq: CLMS), CME Group (NYSE: CME), Cohn & Steers (NYSE: CNS), Cowen Group (Nasdaq: COWN), Diamond Hill Investment (Nasdaq: DHIL), Dollar Financial (Nasdaq: DLLR), Duff & Phelps (Nasdaq: DUF), Encore Capital (Nasdaq: ECPG), Edelman Financial (Nasdaq: EF), Equifax (NYSE: EFX), Epoch (Nasdaq: EPHC), Evercore Partners (NYSE: EVR), EXCorp. (Nasdaq: EZPW), FBR Capital Markets (Nasdaq: FBCM), First Cash Financial (Nasdaq: FCFS), Federated Investors (NYSE: FII), First Marblehead (NYSE: FMD), Fidelity National Financial (NYSE: FNF), Financial Engines (Nasdaq: FNGN), FXCM (Nasdaq: FXCM), Gamco Investors (NYSE: GBL), GAIN Capital (Nasdaq: GCAP), Green Dot (Nasdaq: GDOT), GFI Group (Nasdaq: GFIG), Greenhill (NYSE: GHL), Gleacher (Nasdaq: GLCH), Goldman Sachs (NYSE: GS), Interactive Brokers (Nasdaq: IBKR), INTL FCStone (Nasdaq: INTL), Intersections (Nasdaq: INTX), Investment Technology (NYSE: ITG), Invesco (NYSE: IVZ), Jefferies (NYSE: JEF), JMP Group (NYSE: JMP), Janus Capital (NYSE: JNS), KBW (NYSE: KBW), Knight Capital (NYSE: KCG), Lazard (NYSE: LAZ), Legg Mason (NYSE: LM), LPL Investment (Nasdaq: LPLA), Ladenburg Thalmann (AMEX: LTS), Mastercard (NYSE: MA), Moody’s (NYSE: MCO), MF Global (NYSE: MF), Moneygram (NYSE: MGI), MarketAxess (Nasdaq: MKTX), Marlin Business Services (Nasdaq: MRLN), Morgan Stanley (NYSE: MS), MSCI (Nasdaq: MSCI), MGIC Investment (NYSE: MTG), NewStar Financial (Nasdaq: NEWS), National Financial Partners (NYSE: NFP), Nelnet (NYSE: NNI), Northern Trust (Nasdaq: NTRS), NetSpend (Nasdaq: NTSP), Ocwen Financial (NYSE: OCN), Oppenheimer (NYSE: OPY), optionsXpress (Nasdaq: OXPS), PICO (Nasdaq: PICO), Piper Jaffray (NYSE: PJC), PMI Group (NYSE: PMI), Penson Worldwide (Nasdaq: PNSN), Portfolio Recovery (Nasdaq: PRAA), Raymond James (NYSE: RJF), SEI Investments (Nasdaq: SEIC), Stifel Financial (NYSE: SF), Safeguard Scientifics (NYSE: SFE), State Street (NYSE: STT), SWS (NYSE: SWS), T. Rowe Price (Nasdaq: TROW), Visa (NYSE: V) and Virtus Investment Partners (Nasdaq: VRTS).

Durable Goods Orders Lays a Goose-Egg

Durable Goods Orders were reported unchanged in October. So is it a bad economic signal or just a monthly anomaly? You’ll find the answer in the paragraphs that follow.

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.

Durable Goods Orders

Durable Goods Orders were unchanged in October, and September’s rapid rise was revised lower to +9.2%, from the initially reported +9.9%. No change month-to-month after such a huge increase the month before shouldn’t be something we complain about. It should in fact be expected, but there were several things that bothered me about the report and should also concern the rest of the investment community.

We always look beyond the headline figure in our study of the durable goods data, because of the high ticket costs of transportation goods. These high ticket prices skew the data. That is evident in the latest data, with durable goods orders less transportation up 1.5% month-to-month (versus the much bigger change in the headline figure), after marking a 1.7% (revised) increase in September. Considering the information less transportation, the report would seem much less concerning. It’s also notable that each discussed data point exceeded economists’ expectations, with the ex-transportation forecast average set at negative 0.4%.

However, all is not well. I say this because of the year-to-year change in durable goods orders less transportation. This data line was down 1.8% (revised) in September and lower by 2.3% in October. With the trend continuing through the two month period, we see that there is an issue year-to-year, and it likely marks important economic decline. I think it’s safe to say Europe has weighed against American multi-nationals more this year than last year, with Germany and France both contaminated now. It has also been evidenced by the reported numbers and warnings by industrial players including the likes of Caterpillar (NYSE: CAT). Caterpillar’s outlook and EPS estimates have come down substantially, and other stalwart industrials like General Electric (NYSE: GE) have seen analysts adjust EPS estimates downward as well.

Looking more closely at the data, we see that when excluding the defense industry, new orders only rose by 0.1%. Knowing that the fiscal cliff issue and sequestration pressures defense spending, this data proves meaningful as a predictor. It’s because defense spending is likely to decrease further, barring new and major war, and so some of the supports of durable goods orders and American industry could be removed. The earnings outlooks of Honeywell (NYSE: HON), General Dynamics (NYSE: GD) and others have seen appropriate adjustment as a result. More of the American manufacturing workforce may be displaced as a these companies act to protect the investment interests of their shareholder owners. It is concerning without a replacement channel for workers, and alternative energy is not filling production lines in the U.S. just yet, though domestic energy production is offering some support.

Nondefense new orders for capital goods, an area seen as an integral economic indicator and a measure of business capital investment, rose by 0.8% in October. Also, nondefense capital goods orders excluding for civilian aircraft from the likes of Boeing (NYSE: BA), which has done relatively well over the last few years, rose by a solid 1.7%.

Looking at industry specifics, orders for computers and electronic products increased by 0.9%, as Apple’s (Nasdaq: AAPL) reinvention of computing has driven demand for tablets and new types of computing products, supporting economic activity, but is creating more jobs overseas than at home in my view. Still, the quality of life at home has improved in some respect, and other ancillary job opportunities have resulted beyond the manufacturing of these goods; for instance, in the design and marketing of applications of these products. New order activity in this segment appears to be seasonal, given the prior two months of decline and on recent new product introductions from Apple and competitors ahead of the holiday shopping season. New orders for appliances and electronic equipment were up 4.1% after a similar decline the month before, certainly supported by reviving real estate and on demand for the appliances that fill homes. Demand for flat screen televisions is also robust, as homeowners replace old technology as product prices come down.

The auto industry saw a lull in October, with new orders down 1.6% after a 1.9% decline the month before. Still, Ford (NYSE: F) and General Motors (NYSE: GM) will continue to benefit from burgeoning demand for autos in Asia, especially as Japanese tensions are exacerbated with China over territorial issues.

In totality, I’m concerned about the latest durable goods orders data, especially when considering what the effects of likely higher taxes for some in the United States will have on demand. Europe’s ongoing decline and its lightening demand for American exports remain troubling as well. And so the answer to my rhetorical question is, yes, there is a negative signal in the latest Durable Goods Orders Report. Due to our regular coverage of economic issues, readers may follow this column if interested in similar research and analysis.

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.

Manufacturing Bouncing Like a Dead Cat

The manufacturing segment of the economy has been especially dynamic of late and so demands review. We know that over the past few years, manufacturing, assisted by international demand and a mild recovery here at home, has helped support the economy. We also know that nascent demand decline caused by European recession (depression in some areas) and slowing in the China Asia Pacific region have caused a recent contraction in the American manufacturing segment. However, more recent data have shown a mild bounce. What we must determine from here is whether the sector will bounce robustly or more like a dead cat.

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.

Manufacturing Review

This week ushered in new global manufacturing data, offering information about the U.S., Europe and China. The data produced by Markit Economics showed the manufacturing sector in the U.S. expanded at a faster pace, China contracted at a slower pace and Europe contracted at a faster pace in October. On net, the news was improved, especially for America. The news very likely helped to lift the Dow Jones Industrial Average in early trading Wednesday, but by the close the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) had succumbed to new pressure. The same was true for the Industrial Select Sector SPDR (NYSE: XLI). The catalyst for the turn downward was likely the Monetary Policy Statement of the Federal Open Market Committee (FOMC), through which it continued to intimate concern.

Region	PMI	Change
U.S.	51.3	+0.2
Europe	45.3	-0.8
China	49.1	+1.2

We knew Europe was getting worse when earlier this week the German Finance Ministry warned about an especially difficult fourth quarter for Germany. We noted that the German Chancellor was asking her countrymen to stand behind an economic stimulus plan that stood in complete perfect contrast to what the German led EU is asking of Greece. Markit Economics reported this week the Flash Germany Composite Output Index contracted a full point to 48.1, and the Flash Germany Manufacturing Output Index fell much further, dropping to 45.9. Each measure under 50.0 marks economic contraction, and so Germany is increasingly looking vulnerable to the contagion that is decimating its Southern brothers.

The improvement in China still marks contraction, and in a little less than two weeks, Mitt Romney might be a lot closer to labeling it a “currency manipulator.” While Romney is certain China’s dependence on the American end market will prevent a trade war, the market is probably not completely on board yet. Whether that happens or not won’t have any impact on soft European demand for Chinese made goods.

The American PMI data published by Markit Economics showed the New Orders Index declined to 51.6, from 52.3 in September. Now, that’s not a change that is necessarily worth getting up in arms about, but it may prove to be an early sign of a dead cat bounce in manufacturing. The last report published by the Institute of Supply Management showed a growing PMI, up 1.9 to 51.5, but that was for September. We’ll get October’s data on November 1st. ISM’s New Orders Index increased by 5.2 points on its way to 52.3 in September. Still, if this early data from Markit Economics holds true, the gains of September may not be long lived. At least one economist was skeptical of the ISM report the day it was published.

Anecdotal evidence or information from companies in the goods producing sector of the economy has mostly been contentious. Caterpillar (NYSE: CAT) revealed its concerns about the global economy in late September, sending its shares tumbling. The shares have fallen some more since reporting results at the start of this week and reducing its near-term forecast. General Electric (GE) finally made us look wise on our warning about it in June when it recently declined after reporting its third quarter. While GE met analysts on its third quarter EPS result, a trend of quarterly earnings outperformance ended. Also, analysts’ earnings estimates have been coming down almost without exception. The same is true for other industrials like Caterpillar, Cummins (NYSE: CMI), 3M (NYSE: MMM) and others. Though, there are segments of the sector where it is harder to find signs of trouble in earnings estimates, like in aerospace with Boeing (NYSE: BA) and in autos with Ford (NYSE: F).

In conclusion, it’s still too soon to say if this bounce will resemble that of a robust rubber ball or of a dead cat. However, as readers of this column know, I’m looking for the furry feline sort of fall. Today’s GDP data for Q3 showed better than expected growth of 2.0%, exceeding the economists’ consensus for 1.9% and Q2 growth of 1.3%. However, the GDP Price Index increased by a higher than expected 2.8% over the immediately preceding quarter. Though, the increase was mostly attributable to food and energy prices; but as you know, we think those prices matter to Americans as well. With an Iran event near certainly looming, Europe deteriorating, and tensions with China heightening, I see heavy weights against the sector. Finally, while I’m expecting the next employment report to appear positive on the headline unemployment rate, I continue to view the data misleading and incorrect. Thus, watch out for feline road kill on this segment highway.

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.

Healthy Skepticism of ISM Manufacturing Strength

Monday’s reported improvement in the ISM Manufacturing Index confounded the popular wisdom of the day, which sees manufacturing on the downslide. The critically important data point offered a message that seemed to counter many other manufacturing and related data points, including last week’s Durable Goods Orders data. It also countered the negative tone still emanating from the Philadelphia and New York Fed regions, but truth be told, data from Chicago and other Fed regions had hinted at stabilization. Still, I think there may be a fly in the ointment not yet noticed, and that is the impact of higher pricing on the overall PMI and on New Orders. Because the index is created through survey of purchasing managers, who are bottom line oriented, I believe higher prices paid are being passed through to end product and presenting an improved image in the clouded minds of managers.

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.

It’s also important for investors to remember that this is one month’s data which counters the trend of the prior three months; it also reflects gains over those downtrodden periods (softened base). Finally, the global macroeconomic environment is still slowing in Asia and deteriorating further in Europe. With today’s interdependence of economies, it would be naïve to assume foreign havoc cannot do more damage here at home, where we remain underemployed and where price matters most among consumer decision factors.

My perspective of the current state of the economy is one of issue, and of higher forward concern. Make no mistake about it, the fiscal cliff issue and election uncertainty will put a hold on business activity over the next month or three. Also, war with Iran is highly likely over the next 1 to 6 months, in my view, and should be factored into economic and investment scenarios. I believe it is negligent to completely ignore the issue at this point.

The Manufacturing ISM Report on Business showed its Purchasing Managers Index improved by 1.9 points, enough to take it above 50.0, to a mark of 51.5. The news had the SDPR S&P 500 (NYSE: SPY) up more than half of a percentage point through midday. The SDPR Dow Jones Industrial Average (NYSE: DIA), whose components would seem to be better represented by this data, was up nearly a full point. The Industrial Select Sector SPDR (NYSE: XLI), which is definitely represented by the data, was up to a lesser extent, by 0.6%, which I believe is quite telling. See today’s market report for more on this.

The ISM data showed its New Orders Index, a forward looking measure of interest, moved up by a sharp 5.2 points to 52.3, and into expansionary territory. The Production Index improved as well, rising 2.3 points, though it remained in contraction territory at 49.5. We might say the production index is less reliant on prices, where the orders index can be measured by dollars or units, but is likely thought of in dollar terms by managers. Purchasing managers indicated a renewed propensity to hire, with the Employment Index up 3.1 points to 54.7.

Despite the above listed improvements, there was more than enough reason provided by the report to temper enthusiasm on manufacturing and the economy. Leaving the most important factor for last, we noted Customer Inventories only improved slightly by a half point, and stuck in territory reflecting contraction, at 49.5. Also, Order Backlogs were deeply mired in the mud at 44.0 (+1.5). The Export environment remained difficult as the index improved by 1.5 points to just 48.5. Imports edged up only 0.5 points to a still insufficient 49.5 mark.

Finally, a key factor that could have played an important role in the rise in both new orders and in the overall PMI, may reveal a misleading index. A great many more purchasing managers reported increases in prices paid in September. The Prices Index rose by 4 points to 58.0, which indicates a faster rate of price increase in September than in August. If you survey industrial commodities, you find that some industrial metals declined in price, which reflects poorly for goods demand. Meanwhile, prices for important food components, gasoline, and packaging materials rose, which weigh on manufacturers, increased. Of the 18 manufacturing industries, 10 reported paying increased prices during the month of September in the following order: Food, Beverage & Tobacco Products; Plastics & Rubber Products; Printing & Related Support Activities; Wood Products; Chemical Products; Primary Metals; Furniture & Related Products; Machinery; Fabricated Metal Products; and Miscellaneous Manufacturing.

The indexes are based on survey, and purchasing managers are bottom line driven. They want to meet budgets, and they are of course acutely aware of sales activity in dollar terms. In my view, the increase in prices paid is probably being passed through to some extent, and is directly inflating the new orders and overall PMI data found here. Also, I believe they are indirectly affecting the employment perspective of managers. The other data reported, which was not as dramatically improved, seems to offer a different message.

I suspect the tempered enthusiasm of the XLI offers a check on the gains of the broader indexes today. Investors in this sector will not soon forget the warnings of major players, including Caterpillar’s (NYSE: CAT) of just a week ago. It’s noteworthy that after an early lift, Caterpillar’s shares are lower nearing the close of trading. Though, the shares of most other major industrials are still celebrating the data. This is because capital will not find the sector representative which reported issues. Rather, it will drive in a hopeful manner into the stocks of others, many of which I believe will also eventually report issues.

Company & Ticker	Monday’s Change 2:30 PM
GE (NYSE: GE)	+0.8%
Ford (NYSE: F)	+0.8%
FedEx (NYSE: FDX)	+0.5%
Boeing (NYSE: BA)	+0.8%

It’s my view that this celebration will be short-lived because it is disproportionate to the improvement of September over August and being misled by the price factor. A realistic view of the state of the economy and manufacturing should offer only tempered support to the manufacturing segment. Investors should be skeptical of this data and its staying power given all other information.

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.

Home Builder Confidence to Prove Fleeting

Earlier this week, the National Association of Home Builders (NAHB) reported that its Housing Market Index indicated builder confidence was significantly improved in July. It was still, deeply depressed, but improved nonetheless. Well, as the week progressed and the data flow continued, we couldn’t help but wonder if this new found builder confidence might prove fleeting.

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.

Home Builder Confidence

Home builders like PulteGroup (NYSE: PHM) and K.B. Homes (NYSE: KBH), along with many more smaller builders, indicated newfound joy in a Housing Market Index (HMI) six point surge to a mark of 35. It was the most important monthly increase in almost a decade, placing the index at its highest point since March of 2007. You remember those days, when the Fed chief was saying the crisis would be contained to real estate.

Each component index of the HMI rose, but the scent of hope, perhaps not well-founded, certainly skewed the news. The component index measuring current sales conditions improved six points to a mark of 37, still 13 points below so-so market conditions. A mark of 50 delineates where the majority of builders’ views would be positive versus negative. Thus, on all measures, they are still depressed. Continuing, the index measuring the traffic of prospective buyers gained 6 points to reach a mark of 29, still 21 points short of break-even. Finally, the index indicating hope, where builders provide their view for the next six months, saw confidence swing 11 points higher, to 44 (still 6 points under). So, as you can see, the good news would still make most people cry.

Regionally speaking, each segment of the national market reflected some sort of improvement. The greatest gain and market view was found in sunny California. The Western part of the nation had builders raising their confidence view 12 points, to 44. The next best real estate market was the good old Northeast, where the market is dense and mature. The Northeast gained 8 points to a mark of 36. The Midwest rose 3 points to 34, while the South increased 5 points to 32.

The Chairman of the NAHB, Barry Rutenberg, was clearly enthused, as he noted the benefits of home ownership at such affordable mortgage rates, record low in fact. The Chief Economist of the NAHB, David Crowe, might have to eat some soon. He said, “…this report adds to the growing acknowledgement that housing – though still in a fragile stage of recovery – is returning to its more traditional role of leading the economy out of recession.” I say, there will be no leading of anybody anywhere, but falling back into the pit of despair as the economy deteriorates under the weight of still vulnerable labor conditions, Europe and weakening global trade.

As the week progressed, the housing market news got a lot less cheery. The U.S. Department of Housing and Urban Development snapped some to their senses when it reported Housing Starts for June. Starts improved 6.9% above May’s accounting, to an annual pace of 760K, yes. But Permitting for housing starts, the forward looking indicator here, fell 3.7% in June, to 755K. Single-family project permitting only increased fractionally, while single-family starts rose 4.7%, to 539K.

Thursday, Existing Home Sales, granted - not the realm of home builders, fell 5.4% to an annual pace of 4.37 million in June. That sent the shares of the SPDR S&P Homebuilders (NYSE: XHB) and individual builders including Toll Brothers (NYSE: TOL), D.R. Horton (NYSE: DHI) and Beazer (NYSE: BZH) lower immediately after the report was released at 10:00 AM EDT. However, the group had recovered by the close of trading.

While these two relatively pessimistic data points, in my view, are not overwhelmingly so, they are indicative of the weight of nascent economic strife upon the important housing sector. Thus, even as housing gets some benefit from the lowest cost of homeownership in a long while, on home price decline and mortgage affordability, the weight of the broader economy is coming down on the market now.

I’ve been noting that the fate of all builders is not necessarily the same, with the future of smaller builders bleak against the large publicly traded group, including the likes of Hovnanian (NYSE: HOV), Lennar (NYSE: LEN) and Ryland Group (NYSE: RYL). They’re gaining market share from the poorly capitalized and suddenly struck smaller players, but the condition of the broader environment weighs on them as well. Still, I think if large builders were asked in isolation how they felt about the housing market, the HMI reading might sit above 50 today. That’s not the case though, and is all the more reason to believe the hopeful view of the home builders generally, will likely prove fleeting in the months ahead.

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.

The Report that Changed Everything

The market wanted to open higher Monday, but a 10:00 AM stunner forced an about face. ISM’s Manufacturing Report on Business showed the sector contracted in June. Surprising as it may seem to Wall Street Greek readers, some market mavens had not even considered the possibility. However, we wrote Europe is Already Hurting the U.S. Economy in January, and first began warning of a slowing manufacturing sector in August of 2011. We hope you will get on board so as to not miss our latest forecasts.

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 World Shook

Ala Muhammad Ali, ISM’s Manufacturing Index shocked the world. The Purchasing Managers Index fell to 49.7%, down from 53.5% in May. It certainly shook up economists, who had forecast the index to slip only to 52.0%, based on Bloomberg’s survey. The most negative forecast did not even predict contraction, viewing downside at 51.0% for the index. On the high end, one economist thought the PMI would mark 53.4%. At least none of them had forecast an expansion of manufacturing activity, but who could, given the poor data coming out of regional Fed districts over the past few months. The SPDR S&P 500 (NYSE: SPY) had resurfaced by late afternoon, but the SPDR Dow Jones Industrial Average (NYSE: DIA) was having a harder time getting its head above water. Indeed, major components of the Dow were dazed, with Boeing (NYSE: BA) down near 2%, Caterpillar (NYSE: CAT) cut 1.6%, and Exxon Mobil (NYSE: XOM) and United Technologies reduced by a half point. The Industrial Select Sector SPDR (NYSE: XLI) was hurt 1.3% near the close.

The details of the report were downright dire, with the New Orders Index shredded 12.3 points to 47.8. Order Backlog was likewise reduced 2.5 points to 44.5. It looked near certain that international demand was weighing, with the Exports Index down 6 points to 47.5. The report indicated that comments from the panel ranged, with some purchasing managers expressing continued optimism and others focusing their concern on slowing activity in Europe and China.

One positive aspect was that if exports weigh on manufacturing, it doesn’t necessarily kill our service driven domestic economy. Manufacturing only makes up 10% of American economic production. That said, no new layoffs here at home could be absorbed by an already ailing labor market. The employment component lagged as is typical for employment, with the related index down only fractionally to 56.6. Consumer spending and consumer confidence are already showing significant damage, and so we could easily be led into economic recession.

Prices fell sharply for the second straight month, with the Prices Index down 10.5 points to 37.0. This measures the prices paid for raw materials. Commodities reported down in price included: Aluminum; Aluminum Products; Brass Products; Copper; Corn; HDPE; Oils; PET Resin; Plastic Products (2); Polypropylene Resin; Propylene; Soybean Oil; Steel (4); Steel — Carbon Sheet; Steel — Cold Rolled; and Steel — Hot Rolled. That has got to impact the operations of companies like Alcoa (NYSE: AA), BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RTP), Vale (NYSE: VALE) and Freeport-McMoRan (NYSE: FCX). I would be selling the names now if I held industrial metals and materials producers to begin with.

It’s the first time the manufacturing sector has contracted since July of 2009 or roughly three years. The reasons are clear, economic contraction and slowing production from Europe, and also from China now as well. The interconnected global economy is feeling the effects of contraction in the EU, the world’s largest economy. It’s infecting everything, and so the world woke up today, though it looks to me like stocks are missing the point I’m making as they recover into the close. I hope at least the readers of my column take heed, because this is the best reason you’ve had yet to believe. You don’t have to be shocked with the world when GDP contracts and stocks retrace ground; you can start hedging today.

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.

Homebuilder Shares in My Dog House

The title here highlights the truth, which is that the housing market remains pitiful. The National Association of Home Builders (NAHB) reported its Housing Market Index (HMI) Monday. The inherently biased industry trade group promoted the news of its one point gain for the month of June, over a revised lower prior month result. On that news, the SPDR S&P Homebuilders (NYSE: XHB) gained 2% Monday, with the shares of major builders Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM), Lennar (NYSE: LEN), K.B. Home (NYSE: KBH), D.R. Horton (NYSE: DHI) and Beazer Homes (NYSE: BZH) up between 1.9% and 4.1% on the day. However, the absolute value of the index continues to reflect a dire situation for most home builders and remains hard for me to celebrate.

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.

Homebuilder Sentiment

The HMI improved to a mark of 29, up from 28 for May, revised from 29 at its initial reporting. The NAHB’s chairman said the gain was “reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates.” The economy is stagnating, though, with unemployment holding high and new labor data reflecting a stalling. Consumer confidence has hinged on fear around the European situation and stock market volatility. Economic activity has been tangibly impacted by lighter European buying and its impact to the global economy. Housing’s spring selling season has fallen short of hopes, based on the housing data flow to date.

The HMI report showed current sales conditions improved, with a relative component measure rising two points to 32. That’s the highest it’s been since April 2007, but it’s still poor. Builders’ views for the next six months were unchanged in June, with the component index measuring it remaining at a mark of 34. The most telling statistic is the measure of prospective buyer traffic, because it’s not based on hope or a subjective opinion, at least not as much as the other data points. Prospective buyer traffic was unchanged, and the index measuring it was stuck at a morbid mark of 23.

Regional results were mixed with the Midwest measure up five points to 31 and the West up four points to 33. The Northeast measure fell two points to 29 and the South dropped two points to 26. Please take careful not of this next point. Each of these numerical measures is deeply short of the breakpoint mark of 50, where delineation occurs between builders’ opinions of good and poor conditions. So, I ask you, how poor must housing market conditions be if the index measuring it is 20 points short of breakeven? I think I've made my point...

This article should also interest investors in home builders NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO) and Orleans Homebuilders (AMEX: OHB).

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.

European Disease Infecting U.S. Manufacturing

The latest Empire State Manufacturing Survey, produced by the Federal Reserve Bank of New York, indicates a pickup in May manufacturing activity on the surface. Closer inspection always adds color, and in this case, we believe reflects growing concern about the outlook. It also shows a bifurcation developing within the sector, as mixed messages are delivered about the trend of business. We believe the report intimates infection from European markets reaching relative U.S. exporters. Given the data we’ve reported on around the industrial sector and manufacturing and international trade, and based on what we see developing globally, we view the headline improvement as just a blip in a trending dip.

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.

Relative tickers include the SPDR Dow Jones Industrial Average (NYSE: DIA), Industrial Select Sector SPDR (NYSE: XLI), BHP Billiton (NYSE: BHP), Vale S.A. (NYSE: VALE), Alcoa (NYSE: AA), General Electric (NYSE: GE), Caterpillar (NYSE: CAT), United Technologies (NYSE: UTX) and UPS (NYSE: UPS).

Europe Infecting U.S.

The market celebrated Tuesday morning’s early release of the Empire State Manufacturing Survey because of the headline index increase. The SPDR Dow Jones Industrial Average (NYSE: DIA) rose to start the day, before other considerations (read Greece) weighed. The Industrial Select Sector SPDR (NYSE: XLI) traded choppy, though higher. Major industrial names including General Electric (NYSE: GE), Caterpillar (NYSE: CAT), UPS (NYSE: UPS) and United Technologies (NYSE: UTX) were each convincingly in the green. The NY Fed’s measure of area business showed its General Business Conditions Index gained to a mark of 17.09, up from 6.56 in April. Bloomberg’s survey of economists pegged the increase at a lesser level of 10.0 based on past performance and other indicators that reflected an uncertain direction.

The sub-index measuring new orders, which is a tangible indicator of how the business environment might be developing, inched higher to 8.3, from 6.5 in April. Shipments, however, were significantly higher, with the component measure rising to 24.1, from 6.4. Price increase has been contributing to gains here and likely continued to do so in May. That said, the indexes measuring both prices paid and received showed some moderation of the increases.

While the data showed overall gain, closer inspection shed light on a sort of bifurcated manufacturing environment. Something is developing, as the gain hid the fact that while many businesses reported improved activity, there was a similar increase in the number of manufacturers reporting less business activity. Even as 40.5% of those surveyed reported better business conditions, a gain over April’s 27.9%, 23.4% reported deteriorated business, versus 21.3% in April. Worse yet, 31.6% of those surveyed saw decreased new ordering activity, versus the 22.7% that said the same in April. That contrasted with the May gain in those who saw improved new ordering, where 39.9% saw improvement versus the 29.2% that said so in April.

The weird changes were fueled by decreasing numbers of managers reporting no change. The divergence of data may be reflective of specific markets served by manufacturers. Perhaps those serving Europe to a greater extent are now seeing decreased business. The latest International Trade Report reflected a wider trade deficit between the U.S. and Europe, which we intimated could be due to decreased European demand for U.S. goods and services. Of course, we now know that Spain is in recession as Greece falls into depression. Trouble seems to be spreading as an ill-timed austerity movement is implemented too aggressively across the euro region.

The NY Fed’s report also showed a perception among manufacturing managers that business conditions might deteriorate over the next six months. The forward looking indicators for General Business Conditions, New Orders, Shipments and Employment all decreased in value. Also, expectations for capital expenditures and technology spending declined. This all portends trouble, as the expert ear on the rail is feeling a bad vibe coming. Ironically, given the expected business slowdown, price increases are seen by manufacturing managers. I see inflation coming too, but I believe it will be selective and dynamic, and will follow nearer term deflation in industrial commodity prices. As a result, I’m not a fan of names like BHP Billiton (NYSE: BHP), Alcoa (NYSE: AA) and Vale S.A. (NYSE: VALE) over the short-term, though I believe scarcity, global demand and a breakdown of global trade, combined with fiat currency devaluation, will eventually drive the price of all materials and goods much higher.

This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

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.

Choppy Seas Indicate a Changing Industrial Tide

This week’s economic data flow for the industrial sector offered a conflicting message. What I’ve learned as a fisherman is that where there are choppy seas there is change. Either the wind is blowing in the opposite direction of the tide or one current is bashing up against another. What matters is that one of the two forces will eventually win, and in this case, I believe it will be the force for change, and for the worse.

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.

Industrial Sector Analysis

The article I authored entitled More Manufacturing Malaise was published the same morning that the trading pit celebrated the positive surprise in the ISM Manufacturing Report. I thought, oh boy, the comments are going to be harsh today. But fear not, because just a day later, with the arrival of another data point, the market is once again in the red with the latest complaints lost to the wind. Of course, the disappointing ADP Private Employment Report contributed significantly to the darkness of the day generally, with the SPDR Dow Jones Industrial Average (NYSE: DIA) down about 0.4% through morning before taking back some ground.

Factory Orders were reported Wednesday morning for the month of March. It seems the forewarning from the prior week’s Durable Goods Orders data was forgotten. Durable orders fell 4.0% in March (revised this week from -4.2%), and even when excluding high-ticket transportation goods, durables orders still dropped 1.1%. March Factory Orders fell 1.5%, contrasting sharply to February’s revised increase of 1.1%. However, economists, with the forewarning, had forecast a decline of 1.6% at the consensus.

The Good
Let’s look at the one key conflict offering strong support for manufacturing. ISM’s Manufacturing Index was reported up to 54.8% in April, from 53.4% in March. The first thing to note is that ISM is measuring a different month (current though) than the factory orders data, but the regional indexes reported by the Federal Reserve Banks have also measured April and have offered conflicting information as well.

The market was enthused Tuesday to see New Orders and Production up, with the two component indexes important for the overall PMI rise. Employment also increased, but we note yet again that this is a lagging indicator for the economy and for segments within it. Contrary to my greatest concern, ISM reported that exports were higher in April, with its export component index up 5 points to 59.0. I expect this was an important cog for the market’s drive higher. However, I continue to foresee issue within the important European market, where 20% of America’s exports are sold into. Also, the effects of European and U.S. economic slowing weigh on the emerging world that supplies it. As the situation is yet developing (Spain only just fell into recession), I expect this measure will deteriorate in the future. Also important to note, prices are on the rise; depending on the reason, this can be a positive or a negative reflection of/for the economy. Of the many commodities measured, only two saw price decline, including natural gas and steel. Finally, qualitative comments taken from survey respondents seem to show mixed business sentiment, though 16 of 18 manufacturing industry respondents reported growth to ISM. It is important to note that the index is really a measure of sentiment, where factory orders data is a direct reflection of activity.

The Bad
Returning to the disappointing Factory Orders data, New Orders were lower by 1.5%, mainly due to durable goods orders, especially in transportation equipment. Durables orders fell 4%, while transportation equipment orders dropped 12.6%. In fact, when excluding transportation, orders were flat overall. Because of the high-ticket nature of transportation equipment, this figure varies greatly and is therefore screened out to allow for a clearer view of general economic activity. However, one could argue that transportation equipment will lead economic trends, given its long lead time to delivery. Purchasing managers in this segment would tend to act more conservatively due to intensified risk. On the positive side of things, non-durable goods orders increased 0.5% in March.

The Ugly
Not alarming, but worth keeping an eye on, inventories are up to their highest level on record. This is of course expected in a growing global marketplace. However, it also makes the monitoring of unfilled order trends that much more important. Those continued to rise, but not at an alarming rate.

Something may be developing in transportation equipment though, given the important increase in the segment inventories at the same time that new orders are declining sharply. Aircraft might be of highest concern, given its closeness to consumer spending and the fact that non-defense aircraft and parts orders declined 47.6% in March. Also, orders for ships and boats were down 8.4%. The order to delivery timeline for these products and the trend noted here might provide some concern for the manufacturers’ shares, including Boeing (NYSE: BA), Trinity Industries (NYSE: TRN), American Railcar Industries (Nasdaq: ARII), Greenbrier Cos. (NYSE: GBX), Navistar (NYSE: NAV) and PACCAR (Nasdaq: PCAR).

In conclusion, one final important point needs to be repeated. New orders of non-defense capital goods excluding transportation declined 0.8% in March. While this followed a 2.8% increase in February, that gain also followed a 3.4% decline in January. This segment is what economists follow most closely for a view to business spending. Also, nondurable goods orders continued to rise. Until these segments soften, the economy should not reside in recession, though the stock market will lead not follow. Early indicators of trouble do exist in my view with regard to durable good order trends and within the transportation segment. Manufacturing continues to be supported by development of the global marketplace and the middle class overseas, but it should neither be immune to the spread of contagion from the important European market nor new issue in the critical U.S. market. The American market remains vulnerable, due to a still hobbled labor situation and the new paradigm defining capital availability in the States post the financial crisis. We’ll continue to keep close inspection of the industrial sector so as not to wind up lost in its choppy seas.

This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

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.

Manufacturing Malaise

Over recent weeks, we’ve been concerned about seepage of European contagion and American consumer constraint infecting the American manufacturing sector. The trend of the latest flow of regional manufacturing measures seems to concur. The Chicago Purchasing Managers Index (PMI) was reported down in April. The survey of business managers fell to a 29-week low reading of 56.2, down relatively sharply from March’s level of 62.2. The details show that production, new orders and inventories were lower. Employment improved but the segment is a lagging economic indicator.

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.

Industrial Softness

Meanwhile, the Dallas Federal Reserve Bank reported its Manufacturing Survey Monday. Manufacturing activity slowed in the important state of Texas, which accounts for 9% of U.S. manufacturing production. The relative production index declined to +5.6 from +11.1 previously. Capacity utilization dropped dramatically, with a quarter of all respondents reporting decreases. New orders and shipments were both flat, reflecting the malaise seen in the Midwest measure. The regional Business Activity Index fell into negative territory in April, and surveyed managers mostly reported a deteriorated outlook.

Tuesday offers the latest Manufacturing Index Report from the Institute for Supply Management. The national measure of manufacturing was disappointing from my perspective last month. This month has economists’ expectations set low, with the Business Activity Index seen marking 53.0, which would be a decrease from March’s 53.4 reading. The range of expectations extends from 52.0 to 54.4, and the trend seems to reflect at best a flattening, stagnant environment, and at worst, the precipice of a cliff’s edge.

Other regional indices have mirrored the morose message conveyed today. Last week, the Kansas City Fed published its manufacturing index, which produced a decline to a reading of 3, down from 9 in March and 13 in February. The bank of Richmond produced an improvement in April, with its regional measure rising to 14 from 7 the month before. However, the more widely followed Philadelphia and New York measures marked declines the week before. Philadelphia’s measure fell to 8.5 from 12.5, and New York dropped to 6.6 from 20 the month before. Each of these continues to reflect economic expansion, but it is generally seen at a slower pace. Most of the indexes are benefiting from rising employment, though this is a lagging economic indicator.

Recent declines in data out of Europe and China have many questioning the support of the global environment, which has been important in times of domestic question. Stocks are down on today’s data, following a market ride set forward by Apple Inc. (Nasdaq: AAPL) and Amazon.com (Nasdaq: AMZN) last week. At the close of trading, the SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY) and the PowerShares QQQ (Nasdaq: QQQ) were each in the red. The Industrial Select Sector SPDR (NYSE: XLI) was off even more, down about 0.9% on the day. Given the trend developing and indicated by the regional manufacturing reports, I think the industrials are lower for good reason, and we advised against them about a month ago. The top ten holdings of the XLI were down big Monday, with General Electric (NYSE: GE) cut 1.0%, United Parcel Service (NYSE: UPS) lower by 0.4%, United Technologies (NYSE: UTX) down 0.4%, Caterpillar (NYSE: CAT) off 1.7%, 3M (NYSE: MMM) ending flat, Boeing (NYSE: BA) down 0.6%, Union Pacific (NYSE: UNP) down 1.3%, Honeywell (NYSE: HON) short 1.0%, Cummins (NYSE: CMI) dropped 2.1% and Emerson Electric (NYSE: EMR) down 0.3%.

This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

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.

You Better Check Yourself Post Alcoa

Alcoa (NYSE: AA) started off the earnings season for the Dow Jones Industrials in a surprisingly positive manner. Analysts were generally looking for revenues of $5.77 billion at the mean, and Alcoa reported $6.0 billion. It represented 1% top line growth against the prior year and fractional growth over the fourth quarter, which was impressive given a 9% drop in realized aluminum prices year-to-year. The stock was up 5.4% after hours Tuesday as a result, and the Industrial Select Sector SPDR (NYSE: XLI) was plus 0.7% post the close. Operational expectations were at the opposite end of the spectrum, as evidenced by Alcoa’s 2.9% decline Tuesday, before reporting its results, and by the XLI’s 2% fall.

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.

Temper Enthusiasm Post Alcoa

Before we get too excited about the quarterly result, though, I think we would be wise to consider the creep of global economic deterioration as the quarter progressed. While economic recession remains suspect, proclaiming all’s well on Alcoa’s news may likewise be premature. Indeed, I think it is. And even if it weren’t, Iran is about to happen, but that is supposedly not forecastable according to Wall Street. Yet, Iran just imposed “counter sanctions”, cutting off petroleum exports to starving Spain and Greece, and threatened to cut off Italy and Germany before the west’s own sanctions take effect in early July. It’s clear, at least to me, that the situation is finally coming to a head, with a powder keg now tightly squeezed between American warships and the Iranian coastline, just waiting for its spark.

Alcoa’s earnings per share also exceeded expectations, with income from continuing operations reaching $0.10 a share, against analysts’ consensus expectations for a loss of $0.04, based on Yahoo Finance’s tally. Still, you’ll find those looking to extract from Alcoa’s results pointing more to revenues than earnings, as they better reflect industry fundamentals. As we move down the income statement to the bottom line, Alcoa’s results increasingly reflect its gained efficiencies of operation.

Some would inspect Alcoa’s market segment revenues against the prior year, but the prior quarter comparison should better reflect the changes in economic health we are beginning to see, barring seasonal influences. In that regard, Alcoa saw industrial product growth of 14%, 13% increased demand from automotive, 11% more from packaging, with commercial transportation revenues up 11%. Alcoa and other materials players certainly have global development going for them as an offset against regional cyclical swings.

I would have to manufacture a negative interpretation of these numbers, as they were impressive and surely the reason for the stock’s rise after hours. But how well do they capture what could be developing in manufacturing, as seen in recent data review. How well do they reflect apparent European recession contagion into our market? How well do they reflect consumer concerns and the timid employment situation? How well do they measure the nascent stumble in housing? I say not well, and so I warn investors and econo-watchers to temper their enthusiasm today.

The shares of major industrials and the broader market look to break their slide Wednesday, and it is welcomed here but not expected to hold long based on my economic observations. Caterpillar (NYSE: CAT), Deere & Co. (NYSE: DE), General Electric (NYSE: GE), General Motors (NYSE: GM) and the SPDR Dow Jones Industrial Average (NYSE: DIA) are all looking higher by a point or more Wednesday morning. It may serve as a blessing for some with a nose to the change I smell, a chance to take capital back.

This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).

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