Dashboard update: volatility persists but investor sentiment improved

Macro and Markets Dashboard: United States (January 30, 2016 — PDF)

A busy week for economists, as the Fed met, advance estimate 2015 annual and 2015 Q4 GDP figures were released, and earnings results were announced for hundreds of U.S. companies. Of course, the Fed did not change interest rates, and actually softened their statement language some. The first estimate of 2015 Q4 GDP growth showed a slowdown. Earnings, especially from Facebook, did not disappoint.

Advance estimate GDP data from the BEA showed real GDP growth in 2015 Q4 was lower at 0.7 percent (annualized basis), down from two percent in Q3. Analysts have been expecting a lower rate of growth, so this was not a huge surprise, though it is not great news. The strong dollar has hurt exports, while inventories and savings rates have both increased. The economist offered a nice piece of analysis on the GDP slowdown. As usual, the data will be revised a few times.



The FOMC meeting during January 26-27 was not stopped by winter storm Jonas, though it seems the policymakers are being slowed by forces much much further away. As noted in the Fed’s statement (PDF):

The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.

The FOMC’s additional consideration of volatility abroad is a real wrinkle for monetary policy makers who have an already limited toolkit. Given the potential consequences of highly divergent monetary policy, this additional consideration has become a reality.

Equity market indices were higher on the week. The S&P 500 was up 33 points or 1.7 percent, and the Dow Jones Industrial Average climbed 372 points on the week, 2.3 percent. Much of these gains came from a surge on Friday.

Corporate high yield bond yields fell during the week, but remain in dangerous territory. The yield spread of Merrill Lynch’s index of high-yield corporate bonds over 10 year treasuries remains above 7 percent.


The U.S. dollar softened against most major currencies during the week, including by half a percent each against sterling and the Euro. The dollar weakened by 1.39% against the Australian dollar, 1.75% against the Canadian dollar, 2.5% against the South African rand, more than 3.5% against the Malaysian Ringgit, and more than 6% against the Russian Ruble.

The dollar strengthened by more than 1.6% against the yen during the week, as the Bank of Japan announced that it would take its battle against deflation to the next level by adopting a negative key interest rate.


Dashboard update: another volatile week

Macro and Markets Dashboard: United States (January 23, 2016 — PDF)

While the S&P 500 closed higher on the week, it doesn’t look like market jitters have dissipated. Volatility, as measured by the CBOE’s VIX, reached its highest level since August, spiking at 31.95 on Wednesday, and closing Friday at 22.34.

Excess reserves of depository corporations that are parked with the Fed bounced back towards their peak, despite the Fed’s effort to drain liquidity. Similarly, yields on 10-year treasuries traded near 2 percent (see below).

Oil prices, as measured by front month contracts of WTI, reached a low of $26.19 a barrel, but closed Friday at $32.19. Newly released CPI data showed prices growing at 0.7 percent in December (see below), an increase of 0.3 percent over November, but still well below the 2 percent target.

On the exchange rate front, the dollar strengthened over sterling, the ruble, and the real. A fried who just returned from Brazil noted how relatively inexpensive a vacation from the U.S. to Brazil has become. With more than a foot of snow in Washington right now, opportunity costs are down, as well.




Dashboard update: markets continue their tumble

Macro and Markets Dashboard: United States (January 16, 2016 — PDF)

Major U.S. equity market indices have fallen again this week. The Nasdaq-100 closed at 4,141.08 on Friday, reaching its lowest level since August (see below). Crude oil futures closed below $30 a barrel on the week, the lowest level since July 2000.

The trade-weighted index of the U.S. dollar against major currencies, as obtained from FRED with a one-week lag, reached its highest level since 2003. The dollar strengthened by more than one percent against many major trading partners in the past week. Notably, the dollar increased by 1.5 percent over sterling, by 1.36 percent over the Mexican peso, by 2.17 percent against the Canadian dollar, and by 3.37 percent against the rand.

Monthly data on capacity utilization and industrial production was also bleak. December total industry capacity utilization was 76.5 percent, the lowest level since July 2013. The Fed’s industrial production index registered at 106.2 during December, its lowest level since June 2014.

I see that my dashboard is not capturing the rally in treasury markets (through I notice the decline the yield spread between 10 year treasuries and 3 month t-bills). I’ll aim to add some more charts showing fixed income markets for the next weekly update.




Dashboard update: mixed, but mostly bad

Latest Dashboard: Macro and Markets Dashboard: United States (PDF)

Data over the past week has been both terrible and good, as US equity markets had their worst ever start to the year, but the jobs report was positive. Volatility in Chinese equity markets has been largely cited as the cause for the U.S. sell off. The S&P 500 fell nearly six percent during the week (see below). Oil (WTI) fell about three dollars a barrel over the week.

Meanwhile, jobs data showed a slight uptick in the extraordinarily low labor force participation rate, and a stable five percent unemployment rate. These, the jobs increase, and wage figures, are better than what was generally expected.

The trade weighted dollar strengthened, as the dollar strengthened by more than a percent over the British pound and Chinese yuan during the week, and by more than 3.75 percent against the Australian dollar. It now takes more than 1.41 Canadian dollars to buy a U.S. dollar.

The Fed’s H.4 report shows lots of activity as the reverse repo offerings reflect the Fed’s unconventional tools for draining liquidity from markets. Excess reserves of depository corporations have fallen to their lowest level since 2013 (see far below).




Dashboard update: new year

Latest Macro and Markets Dashboard: United States

I’ve made some adjustments to the dashboard. Several new variables have been added, including the purchasing managers index (below), which is dangerously low (48.6 in November). New labor market indicators cover wage and output growth, which have reversed after a long stretch of relative wage stagnation, and the labor force participation rate, which remains low, even as unemployment returns to medium-run equilibrium levels.

Equity market coverage has been expanded to cover the Dow Jones Industrial Average, and the Nasdaq-100. The Nasdaq has dramatically outperformed the DJIA and S&P 500 since the financial crisis. I’ve also added the Shiller index of price to earning ratios. On the index charts, I’ve added a light gray moving average line, which factors in the 50 weeks before the present value.

As the federal funds rate increases over the coming years, it will be interesting to track some bond market indicators, such as real yield curve rates on treasuries, and corporate bond yields. These variables have been added to the dashboard.