Reversed last weeks gain, and year over year gain down to 11% and falling rapidly towards 0:

MBA Mortgage Applications

Claims remain depressed, but it’s becoming more clear that the reason is difficulty in obtaining them, rather than an indication of a ‘healthy jobs market’:

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The Fed’s labor market index is showing some slack:

Labor Market Conditions Index

Highlights
Employment has been strong, especially the participation rate, but isn’t being reflected in the Federal Reserve’s labor market conditions index which came in at minus 2.1 in March vs a downwardly revised 2.5 percent decline in February. The index, experimental in nature, is a broad composite of 19 separate indicators and is rarely cited by policy makers.

Another bad one, on the heels of very weak auto sales. And even though inventories are now falling, shipments and sales are falling just as fast, keeping the inventory to shipments and sales ratios at elevated levels:

Factory Orders

Highlights
Factory orders fell 1.7 percent in February, more than reversing what was a strong January which, however, is revised 4 tenths lower to a gain of 1.2 percent. February weakness includes a 0.4 percent drop in non-durable orders, one that reflects weakness in petroleum and coal products, and a steep 3.0 percent decline in durable orders which are revised 2 tenths lower from the advance release of minus 2.8 percent.

The February report makes for uncomfortable reading with orders for core capital goods falling 2.5 percent and pointing to continuing trouble for business investment. Other readings include a sharp 0.7 percent fall for total shipments, a 0.3 percent fall for unfilled orders, and a 0.4 percent fall for inventories though the latter is actually a positive given the decline in shipments and keeps the inventory-to-shipments ratio at 1.37.

This year’s fall in the dollar did nothing to visibly boost February’s data though there are hints of relief in last week’s giant surge for the ISM new orders index, one that points to a significant rebound in this report for March.

Durable Goods Orders -3.0% in Feb.

New orders for manufactured durable goods in February, down three of the last four months, decreased $7.0 billion or 3.0% to $229.1 billion, down from the previously published 2.8% decrease. This followed a 4.3% January increase.

Sorry, wrote this up yesterday and never sent it.

Purchase apps remain depressed, though a bit off the bottom, and depressed housing sales reports indicate the growth in mtg purchase apps is more about how purchases are financed rather than an indicator of total home purchases:

MBA Mortgage Applications

Highlights
Purchase applications for home mortgages rose by 2 percent in the March 25 week, with the year-on-year increase continuing very strong at 21 percent. Refinance applications declined by 3 percent from the previous week, continuing recent softness in this component as mortgage rates, while still very low, have edged higher of late. The average rate for 30-year conforming loans ($417,000 or less) increased by 1 basis point from the prior week to 3.94 percent. Though not weak, the report does little to raise hopes of an awakening of the recently quite dormant housing market. A glimmer of such hope may have appeared after Monday’s report of a surprisingly strong 3.5 percent month-to-month rise in pending home sales in February.

Purchase apps:

The ADP forecast for Friday’s number is down from last month but not terrible, and note they revised last month’s forecast lower which means they are forecasting a downward revision of last month’s employment number:

ADP Employment Report

Highlights
Little else may be falling into place but the U.S. labor market is likely to show its strength once again in Friday’s March employment report, based at least on ADP’s private payroll count which came in very near expectations at 200,000 on the nose. There’s little change from February when ADP’s sample posted revised growth of 205,000. Expectations for Friday’s private payrolls are also at 200,000 which would prove a very healthy level though down from February’s even stronger 230,000. ADP isn’t always an accurate barometer of the government’s data but it has definitely been useful the last several reports, signaling convincing acceleration in December, slowing in January, then strength again in February.

Recent Fed comments have caused a lot of portfolio shifting that has driven the dollar lower and most commodity prices higher, most likely due to short covering, and not a change in end user demand:

This came out today- Saudi aren’t selling as much as they’ve been hoping to sell, even as US oil production slumps.

If they leave their discount pricing policy in place prices will be heading a lot lower soon. Their new pricing update should be out in the next few days:

While claims are historically at record lows on a per capita basis, because they are now so hard to get the fact that they are rising some might mean something, but maybe not:

Job cuts also look like they are trending a bit higher as well:

Note how the chart shows this indicator has been zig zagging lower, so we’ll have to wait until next month to see if it zigs back down again:

Chicago PMI

Highlights
Expansion is March’s score for the often volatile Chicago PMI which surged 6 full points to a higher-than-expected 53.6. This is once again, for the 4th month in a row, outside of Econoday’s consensus range! Contraction was the score in February at 47.6.

Details for March show strength for both new orders and backlog orders which are solid pluses for future activity. Production this month was also strong as was employment which is rising once again and at its best rate since April last year. Inventories are still in contraction and input prices are still falling.

Most anecdotal indications on the month of March have been positive including this report which tracks both the manufacturing and non-manufacturing sectors of the Chicago economy.

Declining credit growth:

So well over a year ago the dollar started going up based on falling oil prices, which I suggested was a mistake. That was because it seemed to me that this time around the falling price of oil was not likely to lower the US current account deficit the way lower oil prices have lowered it in the past.

I suggested two reasons. First, US production was likely to go down and therefore oil imports would rise, offsetting much of the price drop. Second, US exports to oil producers were likely to go down, while non oil imports were likely to rise

This is pretty much what happened. Lower oil prices initially helped trade some but then the gain leveled off as oil imports increased. And the non oil trade deficit rose as those exports fell and imports increased.

And so overall the trade deficit went higher rather than lower as had happened historically with falling oil prices:

And so portfolio managers chased the dollar higher in response to falling oil prices. But fundamentally it turns out they were going the wrong way. The US trade deficit has gone higher, and, for example, the euro has experienced a large and growing trade surplus, which fundamentally supports the euro.

So it wouldn’t surprise me if the trade flows drive the dollar back to where it was before it was mistakenly presumed that lower oil prices would fundamentally support the dollar:

And by the way, this is not meant to be taken as trading advice.

I first made this point about the fundamentals working against the dollar and in favor of the euro well over a year ago. At that time I suggested that, fundamentally, the dollar was rising due to portfolio shifting rather than fundamentals, made more so by most portfolio managers believing the relevant fundamentals were interest rate differentials and monetary policy biases. Point is, technicals can carry markets counter to the fundamentals for long periods of time.

That is:

There is nothing so disastrous as a rational investment policy in an irrational world.
-JM Keynes