Services PMI Suggests “0.8% GDP At Start Of Q2” As “Job Creation Slows”

With Manufacturing PMI at multi-year lows and trending lower, why would anyone be surprised that, amid plunging profits in retailers and weakness in restaurant performance indices, Markit’s preliminary Services PMI for April would bounce for the 2nd month in a row to  52.1. However, as Markit notes, despite th emodest pickup, growth is clearly far more fragile than this time last year.”

Dead cat bounce?


As Markit details,

“The upturn in the rate of growth of business activity and increased inflows of new orders suggest the economy should see GDP rise at an increased rate in the second quarter, but growth is clearly far more fragile than this time last year.


Viewed alongside the recent poor performance of the manufacturing sector, which reported its worst month since October 2009, the survey suggests the economy grew at an annualized rate of just 0.8% at the start of the second quarter, only marginally above the pace signalled for the first quarter.

 Survey responses indicate that persistent weak demand from domestic and overseas customers, the struggling energy sector, the strong dollar and election worries are all eating into business optimism.

“The current pace of growth is also only being supported by price reductions, as an increasing number of firms offer discounts to win sales.


Job creation has also slowed as a result of costcutting pressures and uncertainty over the outlook, but remains solid. The surveys point to another 150,000 non-farm payroll increase in April, as robust service sector hiring continues to offset factory job losses.” 

Additionally, growth momentum remained much weaker than that seen on average since the survey began in late-2009.

Survey respondents suggested that subdued client demand and less favourable underlying economic conditions had weighed on business activity at their units in April. Reflecting this, latest data signalled only a marginal rebound in new business growth from the survey-record low recorded in March.

A relatively weak upturn in new work contributed to slower job creation across the service economy in April. Payroll numbers have expanded continuously for just over six years, but the latest increase was the softest since October 2015 and weaker than the post-crisis trend. At the same time, service providers indicated another modest drop in backlogs of work in April, suggesting a lack of pressure on operating capacity.

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Trump And Hillary Refuse To Explain Why They Both Share The Same Address In Delaware

Submitted by Claire Bernish via,
As it turns out, Hillary Clinton and Donald Trump share something pertinent in common, after all — a tax haven cozily nested inside the United States.
This brick-and-mortar, nondescript two-story …

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Case-Shiller Home Price Growth Slowest Since September

For the 5th month in a row (and 10th of last 11), S&P Case-Shiller Home Price growth YoY missed expectations. February saw prices rise 5.38% (below 5.5% exp) which is the weakest annual growth since September 2015. Seattle and San Francisco rose the most MoM as Cleveland and New York saw the biggest drops MoM.

Weakest home prices appreciation since September 2015 and the misses continue…


The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite’s year-over-year gain was 5.4%, down from 5.7% the prior month.

”Home prices continue to rise twice as fast as inflation, but the pace is easing off in the most recent numbers,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

“The year-over-year figures for the 10-City and 20-City Composites both slowed and 13 of the 20 cities saw slower year-over-year numbers compared to last month. The slower growth rate is evident in the monthly seasonally adjusted numbers: six cities experienced smaller monthly gains in February compared to January, when no city saw growth. Among the six were Seattle, Portland OR, and San Diego, all of which were very strong last time.


Mortgage defaults are an important measure of the health of the housing market. Memories of the financial crisis are dominated by rising defaults as much as by falling home prices. Today as well, the mortgage default rate continues to mirror the path of home prices. Currently, the default rate on first mortgages is about three-quarters of one percent, a touch lower than in 2004. Moreover, the figure has drifted down in the last two years. While financing is not an issue for home buyers, rising prices are a concern in many parts of the country. The visible supply of homes on the market is low at 4.8 months in the last report. Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession.”

Combined with weakness in new home sales, starts, and permits, things are starting to creak in the “real estate recovery” narrative.

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Core Durable Goods Tumble For 14th Month, Longest Non-Recessionary Stretch In 60 Years

Following February’s dismal drops across the board in Durable Goods, expectations were high for a March rebound. However, the mean-reverters were greatly disappointed as Orders rose just 0.8% MoM (missing expectations of a 1.9% surge) off a revised lower print, pushing the YoY change back into the red. Core Durables Goods Orders fell YoY for the 14th consecutive month – a streak never seen in 60 years outside of a broad US recession. Capital Goods Orders (0.0% vs +0.6% exp) and Shipments (+0.3% vs +0.9% exp) both missed and were both revised lower. Not a pretty picture…


The headline Durable Goods Orders printed back in the red YoY…


But a 14th consecutive monthly drop in YoY Core Durable Goods Orders has never happened outside of a recession…


It really is different this time.

Most notably, New Orders for defense aircraft and parts surged 65.7% to $6.1 billion – So not even war can keep the US economy afloat any more!!

Finally, the all important core capex series, or nondefense capital goods ex aircraft was unchanged for the month, and printed a 2.4% decline from a year ago. This too represents 14 consecutive months of core capex declines, something else that has never happened outside of a recession.

Charts: Bloomberg

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Sarepta Plunges 50% After FDA Rejects Key Drug

2016 has been a tempestuous year for Serepta shareholders. From over $40 to just $10 and then the miracle ramp from february back to $25 before the writing on the wall ahead of last night’s FDA decision and now – following yesterday’s monstrous short-squeeze (36% surge), a 50% collapse to $8 – a 4 year low for yet another Biotech darling of old. This morning’s collapse comes after the FDA voted that SRPT’s muscular dystrophy drug was not effective



As Bloomberg reports,

An FDA advisory panel voted 7-3 with 3 abstentions that Sarepta’s single historically controlled study doesn’t provide substantial evidence that eteplirsen is effective for treatment of Duchenne muscular dystrophy (DMD).


Some panel members raised questions about study design, said more data are needed.

Not a great morning for Stevie Cohen who just upped his stake (seems he did not get the nod this time)…


Any questions, refer to Christopher Marai or Chad Messer (PhD!)…

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“This Is The Longest Uninterrupted Selling Streak In History” – Smart Money Sells Stocks For Record 13 Consecutive Weeks

One week ago we were surprised to learn that no matter what the market was doing, whether it was going up, down or sideways, Bank of America’s “smart money” (institutional, private and hedge funds) clients, simply refused to buy anything, and in fact had continued to sell stocks for a near-record 12 consecutive weeks.  In fact, the selling continued despite what we said, namely that “at this point it was about time for the selling to stock, if purely statistically, otherwise said “smart money” would be sending the clearest signal yet that the market rally from the February lows is nothing but a huge gift to sell into.”

One week later we were absolutely convinced that finally the selling would end. It has not.

As BofA reported overnight when looking at the latest trading activity by its smart money clients, “BofAML clients were net sellers of US stocks for the thirteenth consecutive week last week—making it the longest uninterrupted selling streak in our data history (since 2008) as clients continued to doubt the market rally.

According to BofA, “net sales were $3.8bn, the biggest in three weeks but the sixth-largest in our data history (since ’08), with sales from hedge funds, private clients and institutional clients alike. This follows a week of net buying by hedge funds the prior week; institutional and private clients have both been consistent net sellers since February. Clients sold stocks in all three size segments, and year-to-date only small caps have seen cumulative inflows.”

While clearly this confirms that the so-called smart money not only refused to buy into the rally and merely looked to sell into the market move higher, it does not explain why the forced selling pressure that has been relentless for three months in a row; perhaps it is redemption requests, perhaps it is merely pervasive bearishness and lack of faith that central planners have regained control; one thing is certain: the “smart money” is once again drastically underperforming the market, which will accelerate the vicious cycle loop of even more redemptions, even more selling, until finally the corporate buyback bid is exhausted and is unable to offset the accelerating and relentless liquidations by “smart money” accounts.

So what did BofA’s clients sell (or buy)?

Clients sold stocks in nine of the ten sectors last week, led by Tech and Industrials; clients also sold ETFs. Only Energy stocks saw net buying, as oil prices continued to rebound—this was the first time clients were buyers of Energy stocks in seven weeks, entirely due to institutional clients’ flows. Cyclical sectors continued to see larger sales than defensive sectors—though we note that Health Care—which has been hurt by a positioning unwind and political uncertainty in an election year—continues to have the longest net selling streak of any sector at eight consecutive weeks. Year-to-date, only Telecom and Materials have seen cumulative inflows (with Telecom buying led by private clients, and Materials buying chiefly due to corporate buybacks).

Worth noting that among the net buying were ETFs, which smart money clients have been buying since early April. Meanwhile, in the Net selling category: Tech since late Jan.; Staples since early Feb.; Industrials since mid-Feb.; Energy and Financials since late Feb; Telecom, Materials and Health Care since mid- March; Consumer Discretionary since late March, Utilities since early April.


So with everyone once again selling, who bought? ” Buybacks by corporate clients picked up last week, but were still below-trend (as buybacks are seasonally light in April)”

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