Carlin: Wall Street Owns Washington

More Red Flags Indicate That We’re Headed for Slowdown


Rail Traffic Continues To Soften

This week’s rail traffic reading showed modest improvement over recent weeks, but the longer-term trend remains negative.  Intermodal traffic was up 3.9% this week which was an improvement over last week’s reading of 2.8%.  The data, however, continues to soften on a rolling 3 month basis with the latest reading coming in at 3%.  That’s the lowest level since January.  The good news is we’re not seeing the type of consistently negative readings that tend to precede a recession.  The bad news is that the growth is tapering.

The Hot New Thing To Worry About Is Lumber Futures

Given the crucial role of housing to the economic recovery, there’s suddenly a lot of interest in what’s going on with lumber futures, which has been on the decline.

SoberLook has the chart:

 

Lumber Futures.PNG

SoberLook

 

This quality leading indicator is breaking down…correct message again?

CLICK ON CHART TO ENLARGE

Lumber has traded within a falling channel for the past 20-years.  When lumber has hit the bottom of the channel, stocks have followed to the tune of 100% rallies twice.

The key to this pattern is when Lumber is at the top of the channel and turns down, it seems to pull the economy, stock market and economy lower with it.

The upper left chart reflects Lumber recently was at the top of the falling channel and the upper right chart reflects a breakdown in Lumber.  Lumber as a leading indicator is usually a good bit ahead of the economy and stock market.

What you should take away from Wal-Mart’s results

Despite the equity markets hitting record highs and other positive economic news, retail giant Wal-Mart Stores Inc.’s WMT -0.50% latest results and forecast show there remains plenty of pressure on global consumers.

And the takeaway from the world’s largest retailer is worth heeding.

Wal-Mart shares dropped 2.3% on Thursday to be the biggest Dow decliner after it reported a disappointing first-quarter profit.

Shares of Home Depot Inc. HD -0.34%, the only other retail Dow member, also were dragged lower 1.3% to be the second biggest decliner ahead of its release next week.

Walmart U.S., the company’s biggest unit, saw a surprise comparable-sales drop after six straight gains. Its membership warehouse chain Sam’s Club’s sales also were at the low end of company’s guidance. Meanwhile international sales in Canada and Japan fell.

Wal-Mart’s second-quarter outlook also missed Wall Street’s expectations.

‘Profitless Rally': Headed for Slowdown

Wall Street’s stocks-are-cheap meme looks as if it will start coming under stress if what one firm calls a “profitless rally” continues.

Stocks have rallied more than 30 percent on a global basis since the 2011 slows, though earnings per share have been flat, according to Citigroup.

Negative outlooks have outnumbered positive more than 4-to-1 for the second quarter, indicating that valuations could start looking stretched soon. That would lead to an environment in which investors must be choosier about which stocks they select to advance a seemingly unstoppable rally.

“As idiosyncratic risk has risen, market participants are paying close attention to company-specific releases and guidance,” Adam Parker, chief equity strategist at Morgan Stanley, said in a client note. “S&P 500 earnings revisions are essentially flat, with estimates revised up for financials and downward for technology.