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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (2055)	3/15/2004 9:26:47 AM
From: mishedlo	Respond to of 116555

New York manufacturing index falls sharply in March By Greg Robb WASHINGTON (CBS.MW) -- Manufacturing activity in the New York area slowed in March from a record pace in February, according to the New York Federal Reserve Bank. The bank's Empire State Manufacturing index fell to 25.3 in March from 42.1 in February. The index had been above 30 for five straight months. Readings over zero indicate expansion. The decline was sharper than expected. Economists were expecting the index to slip to 38.7 in March. The new orders index fell to 23.5 from 34.9, while shipments fell slightly to 26.3 from 26.6. The employment index fell to 9.7 from 16.5 while the workweek index fell to 11.9 from 26.5. cbs.marketwatch.com;

To: gregor_us who wrote (2055)	3/15/2004 9:49:33 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Brian Reynolds on Industrial Production & Treasuries Industrial production rose 0.7%, following a 0.8% gain in January and above the Bloomberg consensus of a 0.4% gain. This report is consistent with our view of the past few months that production growth has exceeded consumption growth, causing an unwanted rise in business inventories and meaning that new orders and production are likely to at least moderate. This report was for February, incontrast to the weak Empire State index earlier this morning which was for February. Additionally, this report was boosted by a 1.6% gain in auto production, which should moderate given current sales levels. The strong production report caused Treasuries to give back 2/3 of their 1/3 point early morning gain, giving mortgage investors another chance to hedge themselves. The question is whether they will avail themselves of this opportunity. If not, then Treasuries would have more room to rally in the coming weeks.

To: gregor_us who wrote (2055)	3/15/2004 9:54:24 AM
From: mishedlo	Respond to of 116555

Brian Reynolds on Empire State Index The Empire State Manufacturing Fed index fell from 42.1 to 25.3, below the Bloomberg consensus of 38.0. New orders fell from 34.9 to 23.5, employment fell from 16.5 to 9.7. Prices paid surged from 33.6 to 50, while prices received only went from 3.5 to 11.7, further indication that surges in energy and other commodity costs are not being passed through to consumers. This report is consistent with our view of the past few months that production growth has exceeded consumption growth, causing an unwanted rise in business inventories and meaning that new orders and production are likely to at least moderate that. This view was a minority view a month ago, but is now more mainstream as investors have pushed bond yields down. While we expect the economy to thus be soft in the spring, we now expect it to accelerate somewhat over the summer as the impact of increased mortgage refinancings (brought on by that drop in bond yields) works its way through the economy. We have pointed out how hard it is to pinpoint where this Treasury feeding frenzy of buying will end. If mortgage investors have finally hedged themselves properly, yields will quickly snap higher. Friday's bounce in yields provided a perfect opportunity, it seems to us, for mortgage investors to get hedged. However, history has shown that there are always some who don't get properly hedged and, if there are enough of them, then the feeding frenzy will continue over the next few weeks. While it is impossible to tell exactly when and where this buying will stop, a fixed income friend of ours reminded us that Fibonacci levels can be a useful guide in environments like these. Using the TNX index as a proxy for the 10-year Treasury (TNX and 10-year futures technically refer to Treasuries with 6.5 to 10 year maturities), we can see that the yield bounced last week off support at the 3.69% level. The next resistance is in the 3.87% area, the next level of support is in the 3.45%, with ultimate support at 3.07%.