The great unrecovery just accelerated with more great unrotation out of stocks following today's February Philly Fed which just plunged from -5.8 to -12.5 on expectations of a positive print of +1. This was the worst print in 8 months, the biggest miss in 9 months, and the biggest two month drop in the New Orders index which crashed to -7.8 in 18 months. Even the attempts at spin were weak: "The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a reading -5.8 in January to -12.5 this month (see Chart). The demand for manufactured goods also showed slight declines this month: The new orders index declined from a reading of -4.3 in January to -7.8 in February. Despite negative readings for general activity and new orders, the shipments index showed improvement: The index remained positive and edged slightly higher to 2.4. The percentage of firms reporting increased shipments (25 percent) was slightly greater than the percentage reporting declines (22 percent)." But fear not: optimism abounds - after all, that's all there is: "The survey’s future indicators suggest that firms expect recent declines to be temporary." Oddly enough survey participants have been hoping for a brighter future for 4 years now. Expect the sellside penguins to say that this number too should be ignored, just like the initial claims earlier, and the new housing starts yesterday. After all one should ignore all data that does not fit the goalseeked script of a centrally-mandated "recovery."
Finally, if and when the market finally syncs up with the Diffusion index reality, things will get ugly.