Monday, April 27, 2015

Merrill Lynch: FOMC Preview

by Bill McBride on 4/27/2015 04:40:00 PM

The FOMC meeting starts tomorrow and the statement will be released Wednesday at 2:00 PM ET. No change in policy is expected.

Here is a preview from Merrill Lynch:

At the March FOMC meeting, the Fed took any policy changes in April off the table. We don’t expect similar language about June policy at the April meeting. We do expect a more somber description of recent activity. This dovish shift in the nearterm view should translate into significantly lower odds of a June rate hike in our view. But any market participants who seek an explicit signal that June also is off the table are likely to be disappointed: the FOMC will want to maintain as much policy flexibility as possible. Fed officials also should stay optimistic about reaching their dual mandate objectives over time. The minutes, released in three weeks’ time, are once again likely to be more informative about the state of the Fed debate.

Without a press conference or updated projections in April, the FOMC statement will be the focus. The main change is likely to be an acknowledgment of the broadly weaker data for consumption, manufacturing and the labor market in recent months. The Committee may suggest temporary factors (i.e., weather and the West Coast port shutdown) account for much of the 1Q slowdown and thus leave the mediumterm outlook unchanged. Meanwhile, the recent firming of core inflation measures may give the FOMC more confidence that downside inflation risks — which rose in the March SEP — have faded. As such, we look for no significant changes in the inflation outlook, although we continue to believe the Fed is under-estimating the persistence of global disinflationary forces.

The March statement dropped “patient,” which had been generally interpreted to mean no rate hikes for the current and subsequent meeting, in order to have more flexibility for setting policy at the June meeting and beyond. To make certain the markets didn’t misinterpret the change in guidance as a sign of imminent liftoff, the FOMC stated that an April rate hike remained “unlikely” and that dropping “patient” did not mean the FOMC had decided on the timing of liftoff. As these clarifications are no longer needed, we expect they will be dropped. The statement may add that the Fed anticipates a “gradual” normalization process, to complement existing language that economic conditions may warrant lower-than-normal policy rates for some time. We expect no changes to the reinvestment program.

Vehicle Sales Forecasts: Best April in "13 Years"

by Bill McBride on 4/27/2015 01:11:00 PM

The automakers will report April vehicle sales on Friday, May 1st. Sales in March were at 17.05 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales will be strong in April too.  April sales (SA) will probably be the best since 2005.

Note:  There were 26 selling days in April, the same as last year.  Here are a couple of forecasts:

From WardsAuto: Forecast: April Daily Sales to Reach 13-Year High

A WardsAuto forecast calls for U.S. automakers to deliver 1.474 million light vehicles this month.

The forecasted daily sales rate of 56,706 over 26 days represents a 6.7% improvement from like-2014 (also 26 days) and would mark the industry’s best April, on a daily basis, since 2002, as well as the highest April sales volume since 2000.
The report puts the seasonally adjusted annual rate of sales for the month at 16.8 million units, down from March’s 17.1 million SAAR, but some 800,000 units above year-ago and slightly ahead of the 16.8 million first-quarter SAAR.
From J.D. Power: New-Vehicle Sales in April Strongest for the Month in a Decade
Total light-vehicle sales are projected to reach 1,463,700, a 5 percent increase compared with April 2014 and the highest level for the month since April 2005 when 1,500,624 new vehicles were sold. [Total forecast 16.6 million SAAR]
Another strong month for auto sales.

Dallas Fed: Texas Manufacturing Activity Weakens Again

by Bill McBride on 4/27/2015 10:36:00 AM

From the Dallas Fed: Texas Manufacturing Activity Weakens Again

Texas factory activity declined in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, posted a second negative reading in a row, coming in at -4.7.

Other measures of current manufacturing activity also reflected continued contraction in April. The new orders index edged up but remained negative at -14. The growth rate of orders index held steady at -15.5, posting its sixth consecutive negative reading.
Perceptions of broader business conditions remained quite pessimistic for a fourth month in a row. The general business activity index stayed negative but ticked up to -16 in April, while the company outlook index moved down to -7.8, reaching its lowest reading in nearly two and a half years.

Labor market indicators reflected slight employment gains but shorter workweeks. The April employment index rebounded to 1.8 after dipping below zero last month.
emphasis added
The last of the regional Fed surveys (Richmond Fed) will be released tomorrow. Three of the four surveys released so far have indicated contraction in April (especially Dallas due to lower oil prices).

Black Knight: House Price Index up 0.7% in February, 4.6% year-over-year

by Bill McBride on 4/27/2015 09:04:00 AM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight Home Price Index Report: February Transactions – U.S. Home Prices Up 0.7 Percent for the Month; Up 4.6 Percent Year-Over-Year

Today, the Data and Analytics division of Black Knight Financial Services released its latest Home Price Index (HPI) report, based on February 2015 residential real estate transactions. The Black Knight HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The Black Knight HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.

For a more in-depth review of this month’s home price trends, including detailed looks at the 20 largest states and 40 largest metros, please download the full Black Knight HPI Report at
The Black Knight HPI increased 0.7% percent in February, and is off 9.5% from the peak in June 2006 (not adjusted for inflation).

The year-over-year increase in the index has been about the same for the last six months.

The press release has data for the 20 largest states, and 40 MSAs.

Black Knight shows prices off 40.7% from the peak in Las Vegas, off 34.8% in Orlando, and 31.7% off from the peak in Riverside-San Bernardino, CA (Inland Empire). Prices are at new highs in Colorado, New York and Texas (Denver, Austin, Dallas, Houston) and several other cities around the country.

Note: Case-Shiller for February will be released tomorrow.

Sunday, April 26, 2015

Sunday Night Futures

by Bill McBride on 4/26/2015 08:45:00 PM

From the Financial Times: Eurozone officials seek to bypass Varoufakis to spur Greek talks

A fraught eurozone meeting in Riga at the weekend has left Yanis Varoufakis, the Greek finance minister, increasingly isolated both in Brussels and in Athens as officials seek to bypass him in an effort to jump-start bailout talks.
Excerpt with permission
Time is getting short.

• 10:30 AM ET: Dallas Fed Manufacturing Survey for April.

Schedule for Week of April 26, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures and DOW futures are up slightly (fair value).

Oil prices were up over the last week with WTI futures at $57.36 per barrel and Brent at $65.28 per barrel.  A year ago, WTI was at $102, and Brent was at $109 - so, even with the recent increases, prices are down over 40% year-over-year.

Below is a graph from for nationwide gasoline prices. Nationally prices are up to $2.54 per gallon (down about $1.15 per gallon from a year ago).

If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by

Last 10 Posts