Philly Fed plunges...again

THU, JUN 20, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF THU, JUN 20, 2019 • 12:22 ET

DJIA		26569.67
		+0.25%	+65.67

S&P 500		2934.63
		+0.28%	+8.17

NASDAQ		8003.43
		+0.20%	+16.11

EDITOR'S NOTE

The Philly Fed's regional manufacturing index was pretty awful this morning--it dropped to 0.3 for June from 16.6. Even worse was the New York Fed's own reading earlier this week, which sank to -8.6 from 17.8.

But a couple of quick caveats:

First, the NY Fed survey period was the first week of June, for most of which it looked like Trump was about to slap tariffs on Mexico, as economist Jim O'Sullivan points out. The President walked that back on the evening of June 7th.

Second, we've seen these surveys plunge like this before. In fact, the Philly Fed in February fell to -4.1 from 17, which was its worst drop since August 2011, before rebounding. And that August 2011 example itself is instructive: that's the one I'll always remember, when the survey plunged to -30.

That had never happened outside of a U.S. recession, and it came on the heels of the U.S. losing its AAA debt rating after Congress nearly refused to raise the debt ceiling. The euro zone crisis was also at a climax and the S&P 500 had dropped 11% in two weeks. Everyone was still worried about a "double-dip" recession. But it never came.

Back then, jobless claims were also still averaging more than 400,000 every week. Today, we learned they fell to 216,000 last week, near historic lows.

In other words, these sentiment surveys, because they are sentiment-based questionnaires of how companies view their business, are subject to these kind of "false positive" shocks. They have to be taken with a grain of salt. I'll keep watching the "real" data for signs of a real, material slowdown.

And if that doesn't materialize? Well, then less than 2% on the 10-year is an incredible perk for stocks and for the economy. And sure enough, the S&P 500 today hit a new intraday high.

See you at 1 p.m.!

Kelly

P.S.: Slack just opened and is up more than 50% as of this writing. Looks like the direct listing model is here to stay.

Kelly Evans

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