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Huge Miss From Philly Fed: Comes In At 8, Expected 20

Tyler Durden's picture




 

Philly Fed drops from 21.4 to 8, worst since August of 2009. Expected at 20.Why is the market down on this? This means that the Fed will soon have its Congress OpCo legalize a) negative interest rates and b) make holding any cash in deposit or money market funds treason.

From the Philadelphia Fed:

Results from the Business Outlook Survey suggest that regional
manufacturing activity continues to expand in June, but at a slower
pace than in May. Surveyed firms reported no expansion of overall
employment and work hours compared with May. Fewer firms also reported
increases in prices of inputs this month. The survey’s broad indicators
of future activity continued to suggest that the region’s manufacturing
executives still expect growth in business over the next six months.

 

Some Indicators Suggest Slower Growth

The
survey’s broadest measure of manufacturing conditions, the diffusion
index of current activity, decreased notably from a reading of 21.4 in
May to 8.0 in June. The index, which had edged higher for four
consecutive months, fell back to its lowest reading in 10 months (see Chart).
Although still positive and suggesting growth, indexes for new orders
and shipments showed a mixed pattern this month — the new orders index
increased 3 points, while the shipments index decreased 2 points. The
current inventory index increased 13 points and moved back from a
negative reading into positive territory, suggesting an increase in
inventories this month.

Until this month, firms’ responses
had been suggesting that labor market conditions were improving, but
indexes for current employment and work hours were both slightly
negative. For the first time in seven months, more firms reported a
decrease in employment (18 percent) than reported an increase (17
percent). The largest percentage (62 percent), however, reported steady
employment levels. The workweek index also declined into negative
territory, its first negative reading in eight months.

Firms Report Reduced Cost Pressures

Nineteen
percent of firms reported higher input prices this month, down
significantly from 39 percent last month. The prices paid index
decreased 26 points but remains positive, now at 10.0. On balance,
firms reported declines in their own manufactured goods — slightly more
firms reported decreases in their prices (15 percent) than reported
increases (9 percent). The largest percentage, 71 percent, reported no
change in the prices of their manufactured goods. The prices received
index fell 10 points, to -6.5, its lowest reading in nine months.

The
future general activity index remained positive for the 18th
consecutive month and increased slightly from 37.0 in May to 40.2 (see Chart).
The future new orders and shipments indexes remain at high levels,
although they fell 9 points and 6 points, respectively. For the 14th
consecutive month, the percentage of firms expecting employment to
increase over the next six months (33 percent) exceeded the percentage
expecting declines (13 percent). The future employment index, however,
decreased 11 points and is at its lowest reading in four months.

In
special questions this month, firms were asked about the probability
that they would relocate some or all of their operations out of the
tri-state region over the next five years (see Special Questions).
The average probability of relocating was 12 percent, a decline from 20
percent last year. The average probability of relocating all operations
was 4.2 percent, which was little changed from previous surveys. Firms
were also asked to rank the factors that were influencing them to leave
or stay in the region. According to the firms’ responses, the two most
important factors influencing the decision to leave are (1) the cost of
labor and (2) taxes, subsidies, or regulations. The two most important
factors influencing the decision to stay in the region are existing
investment in fixed capital and the availability of skilled workers.

Summary

According
to respondents to the June Business Outlook Survey, regional
manufacturing activity continues to expand. A few indicators, including
employment, suggest a slower pace of growth this month. Firms also
reported a moderation in cost pressures this month, and more firms
reported price reductions than reported increases for their own
manufactured goods. Firms expect continued growth in their
manufacturing business over the next six months, with over half of the
firms expecting growth in activity, new orders, and shipments.

 

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Thu, 06/17/2010 - 10:05 | 419253 HarryWanger
HarryWanger's picture

Market brushed it aside after a quick drop and is now following AAPL higher again. 

Thu, 06/17/2010 - 10:16 | 419283 Tipo anónimo
Tipo anónimo's picture

How's that working out for ya?

SPX @ 1110 now on small waterfall.

Thu, 06/17/2010 - 10:23 | 419298 Ted K
Ted K's picture

I think if Harry Wanker is a day trader he's in trouble.

Thu, 06/17/2010 - 10:34 | 419317 HarryWanger
HarryWanger's picture

Sarcasm, guys.

Thu, 06/17/2010 - 10:50 | 419357 Cognitive Dissonance
Cognitive Dissonance's picture

Harry,

I'm very interested in learning more about your change in attitude regarding the market. As you may know, I often write about the psychology of the markets and the people. I would be interested in interviewing you with regard to an article series I'm thinking about. I promise you I have no intention of bashing you and to prove it I will give you final approval or rejection of any parts that include you.

But clearly there is much more going on here, both with you and the market in general, than meets the eye and I would love to know more about you, your background and your thinking. You would stay anonymous of course and like I said, you have final approval over any sections that include you. What say you?

It would be via e-mail. If you say yes, I will give you my e-mail address and you can make (or not make) first contact.

Thu, 06/17/2010 - 10:52 | 419363 HarryWanger
HarryWanger's picture

No problem. Gladly speak with you.

Thu, 06/17/2010 - 11:20 | 419413 Cognitive Dissonance
Cognitive Dissonance's picture

Great.

Please make contact. I will respond to confirm and then I will come up with some questions and we shall see where we go from there. Thanks.

ZHcognitivedissonance at gmail dot com

Thu, 06/17/2010 - 11:28 | 419443 Cursive
Cursive's picture

Honestly looking forward to this.  I feel like I have a lot of history with HW since I remember someone with that handle posting over at ritholtz.com in 2008/9.

Thu, 06/17/2010 - 11:39 | 419460 Cognitive Dissonance
Cognitive Dissonance's picture

I am looking forward to this as well. But as I promised, this won't be a Harry hit piece nor a Harry pandering piece and my main focus is market psychology, not Harry. But it will be fascinating. Harry just responded so now I need to reflect and come up with some questions.

I know I will learn from this discourse. I always learn when I walk in someone else's shoes.

Thu, 06/17/2010 - 12:07 | 419525 citizen2084
citizen2084's picture

Could someone help out a newbie?

Any insightregarding Sarcasm would be helpful.

Thx-c2084

Thu, 06/17/2010 - 12:44 | 419597 Cognitive Dissonance
Cognitive Dissonance's picture

There is a history here on ZH with Harry. At one point Harry was extremely optimistic and has since moderated his optimistic views with what some might say is a more sane and realistic point of view.

So Harry has been on both sides of the fence. I suspect some people weren't sure which side of the fence Harry was on when he commented above about the market.

Thu, 06/17/2010 - 15:52 | 420025 seventree
seventree's picture

I am glad to see that you have reached out to one of the members who have apparently been designated free-fire targets on this site.

I have been reading and occasionally speaking out here for about 6 months. In general I appreciate the prevailing pessimism and grim humor, as my own view is that we are approaching a singularity in the history of human civilization where hubris is potentiated by unrestrained power over our physical and economic environments. However I am often repelled by the appearance of a lynch mob mentality that directs contempt and outright hatred toward anyone who doesn't appear to support the majority negative consensus. Members like Harry and Leo often receive multiple vitriolic replies that don't even relate to what they have just said. In fact they are sometimes attacked in absentia for supposed transgressions of thought without having even made a comment.

I don't know if or where this fits into your psychological observations, but I try to encourage civilized discourse whereever I find it.

Thu, 06/17/2010 - 19:48 | 420500 Cognitive Dissonance
Cognitive Dissonance's picture

"Members like Harry and Leo often receive multiple vitriolic replies that don't even relate to what they have just said. In fact they are sometimes attacked in absentia for supposed transgressions of thought without having even made a comment."

I'm hoping I can present a fair view of Harry and others as a sort of mirror in front of the general ZH audience in the hope that we are willing to see our own narrow mindedness a bit better.

I figure since I wasn't lynched by calling my audience people who are in an Insane Asylum, I can continue to insult my readers in the hope that I learn something along the way. If others learn as well, that's the cherry on top. Actually I think people are willing to learn about the ugly side as long as our faces aren't rubbed in it.

Thu, 06/17/2010 - 10:42 | 419339 Bendromeda Strain
Bendromeda Strain's picture

Watch out for the worm...

Thu, 06/17/2010 - 13:14 | 419664 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

+21

Thu, 06/17/2010 - 13:13 | 419663 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Harry, the correlation between aapl and slw is amazing, check it.  Also, the cult known as apple is in a bauble.  Bet on it.

Thu, 06/17/2010 - 10:05 | 419255 John Law
John Law's picture

Initial jobless claims surging to 472,000 and the Philly Fed Index at 8 is definitely a huge buy indicator. Isn't that right, Jerry Boyer?

 

</Larry Krudlow>

Thu, 06/17/2010 - 10:15 | 419278 Cursive
Cursive's picture

As per what the Labor Dept. spokesman said, it was probably that low because of the Federal holiday.  (major sarcasm off)

Thu, 06/17/2010 - 11:44 | 419474 singlemalt
singlemalt's picture

I really miss the good 'ole days when "snow" was the go-to excuse.

Thu, 06/17/2010 - 10:06 | 419256 Joe Shmoe
Joe Shmoe's picture

Too bad all the sellers already sold.

Thu, 06/17/2010 - 10:12 | 419263 Ragnarok
Ragnarok's picture

ES wants to go to 1150 real bad, just consider this madness a selling opportunity.

 

Only 20% of market volume is real.

Thu, 06/17/2010 - 10:16 | 419279 John Law
John Law's picture

I think thats why the markets aren't tanking. All the bears are waiting for 1150. That would be the right shoulder of the head and shoulder. Neck line of 1040. It breaks that, SPX 860.

Thu, 06/17/2010 - 10:30 | 419312 BobPaulson
BobPaulson's picture

I don't like calling patterns when you've only set up one shoulder and half a head.

Thu, 06/17/2010 - 10:37 | 419325 John Law
John Law's picture

Left shoulder is the Jan. high, head is the April high and now we're about to form the right shoulder:

http://s873.photobucket.com/albums/ab298/johnlaw1/?action=view&current=s...

Thu, 06/17/2010 - 11:25 | 419435 Dadburnitpa
Dadburnitpa's picture

And if the right shoulder is formed so much lower than the left, it's a REALLY bearish signal.  I guess that means Timmay and Benwah will have to set the knobs on the algo machines to 11, (nod to This is Spinal Tap). 

Fri, 06/18/2010 - 22:38 | 422317 BobPaulson
BobPaulson's picture

K, got it now. Was looking at a way short time frame at a baby one setting up there. 

Thu, 06/17/2010 - 10:11 | 419268 bugs_
bugs_'s picture

Nobody expects the philly fed!

 

Thu, 06/17/2010 - 11:05 | 419387 sumo
sumo's picture

Bring out ... the comfy chair.

(oh no, not the comfy chair)

 

Thu, 06/17/2010 - 11:51 | 419479 CrockettAlmanac.com
CrockettAlmanac.com's picture

Beware the comfy chair.

 

Update: guess you beat me to it, sumo. And now for something completely different...

Thu, 06/17/2010 - 14:11 | 419796 LeBalance
LeBalance's picture

BB says: "Mom, with this finger, I touch this key, creating $10^24 instantly and dooming the Earth to become a 'flaming marshmallow.'

Oh sorry Barney Frank is the 'flaming marshmallow.'

Thu, 06/17/2010 - 14:33 | 419860 Ripped Chunk
Ripped Chunk's picture

+ !!!

 

Good laugh on that one

Thu, 06/17/2010 - 10:15 | 419275 Bankster T Cubed
Bankster T Cubed's picture

when the markets are controlled by criminal commissars, nothing f***ing matters

Thu, 06/17/2010 - 10:18 | 419281 lizzy36
lizzy36's picture

Excuse me....the REAL NEWS of the day is the rumor that AAPL is doing a 4-1 stock split causing AAPL to hit a lifetime high. 

 

 

Thu, 06/17/2010 - 11:23 | 419427 Ripped Chunk
Ripped Chunk's picture

Thanks Lizzy. That makes total sense.

Sadly

Thu, 06/17/2010 - 11:50 | 419489 Hephasteus
Hephasteus's picture

Oh they want to have a penny stock after the crash to make it more boiler roomy.

Thu, 06/17/2010 - 10:18 | 419285 Bankster T Cubed
Bankster T Cubed's picture

so what if the stock market is 50% overvalued?

 

so what if bond yields are 50% what they should be?

 

watchya gonna do aboudit?

 ---- Team Geithner spokesperson, Dr. Evil

Thu, 06/17/2010 - 10:21 | 419290 papaswamp
papaswamp's picture

So that is Philly, Dallas, KC all showing massive slow downs...

Thu, 06/17/2010 - 10:21 | 419291 n2dark
n2dark's picture

with hal backing off, close to 100% correlation, eurusd temporarily diverging, 200dma head fake 

what's next ?! initiate crash 2.0

Thu, 06/17/2010 - 10:22 | 419295 Joe Shmoe
Joe Shmoe's picture

Check out the way Bloomberg treats this news.  I don't get how a 0.4 reading on US Leading indicators outweighs tanking employment and output... but then, that's just me talkin

 

Philadelphia Fed Factory Index Slumps to 8 Following May's 21.4 Reading

US Leading Indicators Climb in Sign Recovery to Extend Into Second Half

 

Thu, 06/17/2010 - 11:06 | 419391 mephisto
mephisto's picture

Agree.

And they all miss how the largest positive contribution to the leading indicators is the yield curve slope. Which IMO is utterly irrelevant without a functioning credit transmission mechanism to business.

This from the bloomberg market data / economic calendar page:

The headline for the LEI looks beefy, plus 0.4 percent, but the gain is centered where it has been this whole recovery: in the yield curve where zero policy is making for a very wide spread between short and long rates. The second biggest plus is in money supply which is a very iffy component distorted by uncertain measurement and subject to wide swings. The most substantial gain in May is the factory workweek, which based on yesterday's industrial production report is likely to continue to rise.

Negatives for May are stock prices, where the outlook for June is still uncertain, and building permits where post-stimulus contraction is a risk. Initial unemployment claims are a marginal negative for May but, based on this morning's claims report, look to be a less marginal negative in June.

A clear plus in today's report is the coincident index which is up 0.4 percent for a second straight month in what points to a formal recognition that the recession is over. This is perhaps a bit ironic given what appears to be an uncertain outlook for the leading indicators.

Thu, 06/17/2010 - 10:30 | 419311 Headbanger
Headbanger's picture

Hey Roubini, you were saying???

 

Then again, that should say: Yo Roubini..

 

Thu, 06/17/2010 - 10:35 | 419324 Xibalba
Xibalba's picture

Oooo...green shoot!

Thu, 06/17/2010 - 10:46 | 419332 John McCloy
John McCloy's picture

On a side note. What crack pipe do banks think we are willing to smoke if they intend on ending free checking?

1)Why should we suffer because they can no longer rely on the billions in stolen overdraft fee charges?

2) How dare they believe they can accept 0% rates and charge for checking.

3) This is unsustainable because everyone will switch to the first bank that keeps free checking. Personally I must have signed up about 20 people this year with TD bank because they reimburse all my ATM fees and are an incredible bank regarding customer service.

4) Apparently having billions in customer deposits to gamble in the markets is not enough for them that they now need checking fees.

   Apparently that is why the banks have some false strength. Regardless I reiterate what I have believed since last fall that losing overdraft fees is going to place serious pressure on their capital requirements since they are losing that monstrous income source. So now we have banks that can no longer make money in any regard aside from the stock market and short squeezes and here we are a year later about to flush directly into the depression and the market is barely over 10,000 and rates have been 0% for an eternity and they still have the SPE's off balance sheet assets that they have to raise capital for by Jan 1 2011 from FASB 166/167. We also have FASB considering a return to market to market.

   So banks are not making money from lending. They are still not taking losses, they are losing overdraft fees, there are witnessing new souring loans, unemployment checks are drying up, new claims are increasing, credit is destroyed for consumers and all those supposed profits during the bubble were proven to nothing more than manufactured temporary earnings that resulted from 0% rates, speculation and loose lending that can never occur again. So all those earnings ended up being taxpayer debt do who in their right mind thinks the big banks can return to normalized earnings when the majority of those earnings were false and reliant upon mark to market markups on the way up.

  These guys are out of control

Thu, 06/17/2010 - 11:20 | 419421 Village Idiot
Village Idiot's picture

Here's throwing a little Chinese hot mustard on a razor cut - my bank charges $4.40 if there is an error in arithmetic at time of deposit - even when the error is their fault.  Of course, I don't pay it, as they would prefer, at this point in the relationship that I not yell "fuck off" whilst other depositers wait their turn.

Thu, 06/17/2010 - 11:31 | 419442 Ripped Chunk
Ripped Chunk's picture

Don't they just deduct it from the amount of the deposit credit that night?

I would either:

1. Find a new bank

2. Go collect some dog feces and take them down to the bank and hurl them at the highest ranking person there that day (usually found in the big corner office in the back with one piece of paper on his desk watching internet porn) 

Thu, 06/17/2010 - 12:56 | 419620 JR
JR's picture

The chart, Derivatives Notionals, Commerical Banks, referenced by Ilan Moscovitz from the Office of the Comptroller of Currency as of Dec. 31, 2009 shows that “the problem (of risk) is getting worse.” It shows that the notional amounts of derivatives concentrated in five federally insured TBTFs-- JPMorgan, Bank of America, Goldman Sachs, Citigroup and Wells Fargo— have risen to $206 Trillion.   Everyone else, $7 Trillion.

“No matter how you measure it,” says Moscovitz, “this is a ton of risk, and it's concentrated in five hands…

“There are at least three problems with this picture,” says Moscovitz in The Coming Financial Meltdown :

1. This is crazy.
At 14 times the size of the U.S.'s gross domestic product, if even a fraction of these opaque and convoluted instruments blow up, as they did in 1998 and again in 2008, it would be bad news bears for everyone who doesn't live on roots and berries.

2. They're too big to fail.
The chief selling point of the financial-overhaul bill is that it somehow reduces the problem of too big to fail. Whether or not you believe that it does (it does not), one thing is for certain: The liquidation authority that is supposed to restore discipline and end moral hazard in financial markets is unlikely to work so long as derivatives traders continue to use American families' deposits as human shields. Derivatives collateral gets paid out before deposits, so the next time a megabank melts down, the Federal Deposit Insurance Corp. could be left holding the bag in liquidation.

3. We're subsidizing them.
Market-making can sometimes be socially useful, while gambling billions of dollars on interest-rate movements is probably less so, and given the dangers, may be socially detrimental. But none of these risky activities needs to be subsidized by our FDIC-insured deposits, 0% Federal Reserve liquidity guarantees, and the prospect of future bailouts. Continuing to do so will only encourage the market to grow larger and more dangerous, and siphon capital away from more legitimate activities like, say, lending money to support an economic recovery.

http://www.fool.com/investing/general/2010/06/15/the-coming-financial-meltdown.aspx

Thu, 06/17/2010 - 10:38 | 419335 augmister
augmister's picture

Time to move more FRNs into the Bank of Sealy and Bank of Maytag....

Thu, 06/17/2010 - 11:36 | 419457 Ned Zeppelin
Ned Zeppelin's picture

now, that's funny.

Thu, 06/17/2010 - 10:39 | 419336 n2dark
n2dark's picture

it's official hal _IS_ backing off

Thu, 06/17/2010 - 11:08 | 419399 sumo
sumo's picture

I'm waiting for the afternoon ramp. The Quad Witch ain't dead yet.

Thu, 06/17/2010 - 11:15 | 419412 Renfield
Renfield's picture

Denninger noticed that someone traded this news 15 minutes in front of its publishing.

Again.

http://market-ticker.org/archives/2417-OBVIOUS-Insider-Trading-Again.html

Thu, 06/17/2010 - 11:38 | 419447 Ripped Chunk
Ripped Chunk's picture

Guess they didn't see this coming?

They should consult The Psychic Friends Network  next time.

Thu, 06/17/2010 - 11:33 | 419450 HarryWanger
HarryWanger's picture

Yes, Philly Fed was lower but look at this gorgeous spin on Leading Indicators at CNBC.com:


Leading Economic Index Soars in May

Separately, the Conference Board, an industry research group, said on Thursday its gauge of leading indicators rose to a new peak, suggesting the U.S. economic recovery will continue.

Thu, 06/17/2010 - 11:38 | 419459 Ripped Chunk
Ripped Chunk's picture

The Psychic Friends Network actually went bankrupt (couldn't they have seen that coming??)

CNBC is the "New Psychic Friends Network"  The results will be the same.

Thu, 06/17/2010 - 11:49 | 419481 Ned Zeppelin
Ned Zeppelin's picture

Looks like we have a divergence of views.  The Philly Fed survey is anecdotal and thus a bit fuzzy, and the rest of these are no different. I'll go with Tyler's theory that the market is all about the EURJPY trade.

Thu, 06/17/2010 - 12:33 | 419580 Ludic Fallacy
Ludic Fallacy's picture

Since there is a banking rant here, I wonder what would happen if there was a non-for-profit bank instituted.  Free checking and savings (the savings would actually yield interest), the banks holds 100% for reserves in UST or some other "safe" instrument to cover their costs.  No loans provided, just a basic checking/debt holding company, great customer service, and completely safe.  Heck, they could have financial planners on staff, or some form of automated planning services to help people control their cash flow and debt.

I wonder what all of you think about this idea?

Thu, 06/17/2010 - 13:11 | 419652 HungrySeagull
HungrySeagull's picture

Isn't that called a Credit Union?

Thu, 06/17/2010 - 13:41 | 419724 GovernmentMule
GovernmentMule's picture

Just need to add HFT services for the "little people"

Thu, 06/17/2010 - 13:27 | 419692 Ludic Fallacy
Ludic Fallacy's picture

I honestly don't know.

Thu, 06/17/2010 - 13:48 | 419744 Ludic Fallacy
Ludic Fallacy's picture

They are called "small folk", not "little people".  How non-british of you.

Thu, 06/17/2010 - 14:06 | 419778 Remington IV
Remington IV's picture

Herbert Hoover ... I mean , Obama , should be feeling swell about this

Thu, 06/17/2010 - 14:23 | 419832 Grand Supercycle
Grand Supercycle's picture

Those EURUSD bullish warnings have strengthened further today.

Vice versa for the USD index of course.

It seems the current EURUSD downleg has ended.

http://stockmarket618.wordpress.com

Thu, 06/17/2010 - 15:01 | 419912 HungrySeagull
HungrySeagull's picture

I actually don't mind being "Little" "Small" or whatever.

Just a few days ago I spoke with a Branch manager about moving a small amount of money related to our little two bit, good for nothing over in debt life and when it was resolved... she made a comment...

 

I am glad you are having us move the money instead of the "Other" bank (FDIC) that could do the job much faster for cost. The Problem was the Manager says it will take a few days before all is settled between her bank and the target bank. Instead of paying someone a fee to make it happen in a few hours. *Shrugs... we live pretty slow here in the south.

 

Things are slow living in the south, HFT means nothing to me. If you buy something you held it until you die. Then maybe a flea shop will sell it to someone else who will know what to do with it.

 

Not fantasy trading that goes "Poof" if you blinked at the wrong time. That is not banking and that is not how you want to move money.

 

If somehow the USA Dollar went Poof along with everything else, that is ok too. We have some crops to trade for needful things you all may not need anymore in wall street LOL, just be sure to be able to eat.

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