Wednesday, May 27, 2020
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Economic data may have bottomed. But it’s still not good.
The biggest debate in the economics world right now is whether the worst of the pandemic-related economic shock is behind us.
And two pieces of data released Tuesday contribute to a recent collection of economic news that suggests the bottom is indeed in.
Data not getting worse is a long way from data being good. But in this environment, that might be enough for investors.
On Tuesday morning, the May reading on consumer confidence from The Conference Board as well as new home sales data both topped expectations. Ian Shepherdson at Pantheon Macroeconomics said of this data in an email on Tuesday, “In one line: bottoming-out.”
“I would say that the worst is probably behind us in terms of the actual decline in activity,” Jesse Edgerton, senior U.S. economist at JPMorgan, told Yahoo Finance’s The Final Round on Tuesday.
And so it does seem that at least for this phase of the recession, few economists and investors are still wondering how bad things will get. That question has been answered. Though as we noted last week, very few investors are betting on a V-shaped recovery. And just because things aren’t getting progressively worse doesn’t mean things are good.
Edgerton notes that TSA data show air travel is rising and OpenTable data suggests people are going back to restaurants, but adds that these increases have been “tentative” and off very low bases.
“Even in places like Texas and Georgia that have been lifting their stay-at-home orders the number of people that have been going to restaurants is still down two-thirds from where it was last year at this time,” Edgerton added. “So I think even in those places you’re just still seeing people not yet confident enough to really bounce back.”
And as The Conference Board’s chief economist Bart Van Ark told The Final Round on Tuesday, “this is a stabilized index, there’s not a lot of good news coming out of it, the only thing is that people do see the economy re-opening up and that does give them some optimism.”
Sam Ro noted on Tuesday that corporate earnings have been relatively less disappointing than economic activity, perhaps a partial explanation for why the stock market has continued its recent rally.
But amid historic drops in employment and activity, the idea that the most severe parts of this economic slump might be over seems to be enough to keep investor enthusiasm afloat.
What to watch today
7 a.m. ET: MBA Mortgage Applications, week ending May 22 (-2.6% prior)
10 a.m. ET: Richmond Fed Manufacturing Index, May (-53 in April)
2 p.m. ET: Federal Reserve Beige Book
Notable reports: Ralph Lauren (RL)
4 p.m. ET: Workday (WDAY) is expected to report earnings of 46 cents per share on $1 billion in revenue
4:05 p.m. ET: Box (BOX) is expected to report earnings of 5 cents per share on $182.93 million in revenue
4:05 p.m. ET: HP Inc. (HPQ) is expected to report earnings of 45 cents per share on $12.88 billion in revenue
4:30 p.m. ET: Toll Brothers (TOL) is expected to report earnings of 44 cents per share on $1.51 billion in revenue
YAHOO FINANCE HIGHLIGHTS