Advertisement
Canada markets open in 3 hours 35 minutes
  • S&P/TSX

    21,837.18
    -12.02 (-0.06%)
     
  • S&P 500

    5,149.42
    +32.33 (+0.63%)
     
  • DOW

    38,790.43
    +75.63 (+0.20%)
     
  • CAD/USD

    0.7365
    -0.0024 (-0.33%)
     
  • CRUDE OIL

    82.48
    -0.24 (-0.29%)
     
  • Bitcoin CAD

    86,887.06
    -5,293.81 (-5.74%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • GOLD FUTURES

    2,156.30
    -8.00 (-0.37%)
     
  • RUSSELL 2000

    2,024.74
    -14.58 (-0.72%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • NASDAQ futures

    18,189.75
    -41.75 (-0.23%)
     
  • VOLATILITY

    14.57
    +0.24 (+1.67%)
     
  • FTSE

    7,719.98
    -2.57 (-0.03%)
     
  • NIKKEI 225

    40,003.60
    +263.20 (+0.66%)
     
  • CAD/EUR

    0.6792
    0.0000 (0.00%)
     

Cars and manufacturing — What you need to know in markets on Thursday

We’re into the final stretch of 2016 as Thursday marks the first day of December.

On the economic data front, we have another busy day with reports on auto sales, manufacturing, and the weekly report on initial jobless claims due out.

Expect the manufacturing and auto numbers to be most closely watched.

This follows a busy day on Wednesday as the price of oil spiked following a production agreement from OPEC.

Cars, Manufacturing

The highlight of another busy day of economic data will be dueling manufacturing reports Thursday morning. First up is Markit’s final reading on manufacturing activity in November at 9:45 a.m. ET, followed by the Institute for Supply Management’s PMI reading at 10:00 a.m. ET.

ADVERTISEMENT

Economists expect Markit’s reading to come in at 53.9, while ISM’s figure should hit 52.2. Readings over 50 indicate expansion in the sector while readings under 50 would signal contraction.

These reports should, in the coming months, carry additional weight as they are survey-based measures — rather than hard data-based — giving markets a better read on how the economy could evolve going forward instead of providing a backward-looking assessment.

Also out Thursday will be the monthly reading on US auto sales, which should hit an annualized rate of 17.7 million. Auto sales have been among the strongest economic measures during the post-crisis expansion.

A report in The Wall Street Journal published Wednesday noted there’s been an uptick in new-car purchases with negative equity, that is, folks who still owe money on an existing car are buying a new car and rolling over the existing debt.

The auto loan space, in some circles, has been a point of concern in the last year or so as lower-quality borrowers have seen more credit extended their way with rates near record lows and maturities near record longs.

The economic data slate will be rounded out by the weekly report on initial jobless claims, due out at 8:30 a.m. ET.

Economic Overview

Out Wednesday was one of our favorite, but most-overlooked, economic data reports: the Federal Reserve’s Beige Book.

This report, published eight times per year two weeks before Fed policy statements, is a collection of economic anecdotes — or anecdata — that give us a sense of where the economy stands in each of the Fed’s 12 districts.

Among the notable commentary out of Wednesday’s edition was an overall downbeat view on the auto market.

Here’s the Fed’s report:

Motor vehicle sales declined slightly in most reporting Districts during the period. Kansas City saw sales decline well below year-earlier levels. In contrast, new vehicle sales in Chicago were characterized as strong, a circumstance which dealers attributed in part to aggressive incentives.

Philadelphia indicated that light vehicle sales were plateauing at high levels, while Cleveland reported modest growth in motor vehicle sales but noted that this was driven by the used vehicle market. The New York and St. Louis Districts also noticed a shift in demand toward used vehicles.

Richmond and St. Louis contacts suggested that softening vehicle sales might be attributed to uncertainty surrounding the presidential election, while contacts in Dallas point to energy-related weaknesses as a factor in the sales decline. Respondents in St. Louis and Kansas City expected a modest pickup in vehicle sales during the next several months, while contacts in Dallas were less confident for future growth.

And so in this overview we see both a shift to used vehicles and pressure on new car sales. Hence, as we highlighted above, the increase in negative equity sales. The easiest way to fight the sale of used cars is to make it more attractive to buy new.

Elsewhere in the Beige Book we got commentary on the New York housing market, which continues to show signs of stress at the very high end, likely more a reflection of the strength of the US dollar and trepidation from the global super-rich.

“The District’s housing markets have been mixed since the last report, with the high end continuing to underperform,” the report said.

“New York City’s rental market has been mostly steady, except at the high end, where the inventory has risen and rents have drifted down. Landlord concessions have grown increasingly prevalent, especially in Manhattan and Brooklyn. In contrast, rental markets in northern New Jersey and across upstate New York have strengthened further: vacancy rates are at or near multi-year lows, while rents continue to climb and are up roughly 4 percent from a year earlier.” (Emphasis added.)

Further Reading

Cord-cutting is sort of an illusion (WSJ)

The stock market in 2017 is going to be all about corporate taxes (Yahoo Finance)

MNUCHIN: ‘This will be the largest tax change since Regan’ (CNBC)

Silicon Valley got more pessimistic on the economy in November (Modest Proposal)

Farhad Manjoo on Snapchat (NYT)

Inventor of the Big Mac dies at 98 (AP)

Myles Udland is a writer at Yahoo Finance.

Read more from Myles here; follow him on Twitter @MylesUdland