by Calculated Risk on 7/23/2012 10:27:00 AM

Always a sign of desperation ...

From the Financial Times Alphaville: Spain and Italy take gold for flailing, banning short-selling

From Reuters: Spain Bans Short-Selling for 3 Months

Spain's stock market regulators banned short-selling on all Spanish securities on Monday for three months and said it may extend the ban beyond October 23.

Earlier on Monday, Italy reintroduced a temporary ban on the short selling of financial stocks ...

The yield on Spanish 10 year bonds is up to 7.5%; the yield on Italian 10 year bonds is up to 6.33%.

Some related articles from the WSJ: Treasury Yields Hit New Record Lows, Oil Prices Plunge 4%, and Euro Hits New Multiyear Lows. The US 10 year treasury yield has fallen to 1.42%, Brent oil prices are down to $103.43, and the euro is down $1.21.

by Calculated Risk on 7/23/2012 08:40:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic activity increased in June

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to –0.15 in June from –0.48 in May. ...

The index’s three-month moving average, CFNAI-MA3, increased from –0.38 in May to –0.20 in June—its fourth consecutive reading below zero. June’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests growth was below trend in June.

According to the Chicago Fed:

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 7/22/2012 10:15:00 PM

First, from the Financial Times on "open-ended QE": Bleak jobs outlook raises heat on Fed

In an interview with the Financial Times, [San Francisco Fed President John Williams] forecast that unless “further action” was taken, there would be a lack of progress in boosting the jobs market ...

He added that there would also be benefits in having an open-ended programme of QE, where the ultimate amount of purchases was not fixed in advance ... “The main benefit from my point of view is it will get the markets to stop focusing on the terminal date [when a programme of purchases ends] and also focusing on, ‘Oh, are they going to do QE3?’” he said. Instead, markets would adjust their expectation of Fed purchases as economic conditions changed.
excerpt with permission

The key releases this week are the new home sales report on Wednesday and the advance Q2 GDP report on Friday.

• On Monday, at 8:30 AM ET, the Chicago Fed is schedule to release the National Activity Index for June. This is a composite index of other data and will probably be fairly weak.

The Asian markets are red tonight, with the Nikkei down 1.3% and the Shanghai Composite down 1.1%.

From CNBC: Pre-Market Data and Bloomberg futures: the S&P future are down about 6, and the DOW futures down about 50.

Oil: WTI futures are at $91.12 (this is down from $109.77 in February, but up last week) and Brent is at $106.17 per barrel.

Yesterday:
• Summary for Week Ending July 13th
• Schedule for Week of July 15th

Two more questions this week for the July contest:

by Calculated Risk on 7/22/2012 08:34:00 PM

As residential investment increases, there will be positive spillover effects ... usually it is "As housing goes, so goes the economy!"

From Mike Ramsey at the WSJ: As Homes Go, So Do Pickups (ht Joe)

[I]n the past few months, more lots have been cleared for construction and [Hardwood's] phone has been ringing more frequently. So in June he went out and bought a new Chevrolet 2500 diesel truck with a backup camera and a hands-free Bluetooth phone link.

"There is a lot more steady and consistent work," said the 30-year-old Mr. Harwood, whose company Broadleaf Landscape, in Damascus, Md., does a lot of work at new homes. "I was more comfortable with buying a new truck at this point in time because of the market change."
...
In the first half of this year, sales of full-size pickups made by the Detroit Three increased 13%, to 707,175 vehicles.

Yesterday:
• Summary for Week Ending July 20th
• Schedule for Week of July 22nd

by Calculated Risk on 7/22/2012 03:03:00 PM

The Department of Transportation (DOT) reported on Friday:

Travel on all roads and streets changed by +2.3% (5.7 billion vehicle miles) for May 2012 as compared with May 2011. Travel for the month is estimated to be 258.4 billion vehicle miles.

The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is mostly moving sideways.

Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 54 months - and still counting.

The second graph shows the year-over-year change from the same month in the previous year.

Gasoline prices peaked in April at close to $4.00 per gallon, and then started falling.

Gasoline prices were down in May to an average of $3.79 per gallon according to the EIA. Last year, prices in May averaged $3.96 per gallon, so it makes sense that miles driven are up year-over-year in May.

However, as I've mentioned before, gasoline prices is just part of the story. The lack of growth in miles driven over the last 4+ years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 50 drivers drive fewer miles) and changing driving habits of young drivers.

A new report suggests that driving preferences are changing for younger drivers:

From 2001 to 2009, the average annual number of vehicle miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita—a drop of 23 percent.

With all these factors, it may be years before we see a new peak in miles driven.

Yesterday:
• Summary for Week Ending July 20th
• Schedule for Week of July 22nd