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A holiday shortened week awaits investors with just a handful of data releases as the markets remain closed for Martin Luther King Jr. Day.
Releasing on Wednesday will be the Chicago Fed National Activity Index, or CFNAI. The CFNAI had surprised to the upside rising from -0.71 to 0.56 in November, with all four broad categories of the index posting increases.
Industrial production, which had been a drag on the numbers in October, rebounded in November.
CFNAI is a gauge of economic activity and related inflationary pressure with a positive reading pointing to above average growth and a negative reading pointing to the contrary.
The index tends to be a bit volatile on a month-to-month basis and a review of the three-month moving average and the diffusion index will provide a more consistent view. A three-month moving average above -0.70 and the diffusion index above -0.35 have historically been associated with periods of economic expansion.
The three-month moving average was up -0.25 in November (versus -0.35 in October). The CFBAI Diffusion Index was slightly up at -0.23 in November (-0.24 prior).
Existing home sales for December will also be releasing on Wednesday with consensus estimates at 5.42 million versus 5.35 million in November.
Existing home sales had decreased 1.7% in November but were up 2.7% from a year ago.
The strong labor markets and low interest rates have been supportive of home buying but low inventories have been a drag on sales. We believe that healthy U.S. consumers would continue to lend support to the housing market.
Preliminary Markit Manufacturing PMIs will be available on Friday and could provide insights as to the state of the global manufacturing industry.
The sector had been impacted by the cyclical downturn that began in the middle of 2018 but is now starting to show early signs of recovery. The U.S.-China trade war took a toll on the sector but the recent easing of tensions should lend support.
We believe that the worst is over for the global manufacturing sector. The sector is likely to stabilize in the first half of 2020 and possibly accelerate modestly in the second half of the year.
U.S. manufacturing had seen some slowdown in the middle of last year but has been recovering since at a modest pace.
Markit U.S. Manufacturing PMI was 52.4 in December, down slightly from November’s 52.6. Business sentiment remains subdued but new business activity and production is starting to improve.