Containers peaked in October at 1.35 million, and by February, this was down to 0.85 million.  In April, we saw the first uptick to 1.03 million but this number will hopefully show further evidence of the economic recovery. You may recall my comments about "light from a cardboard box" in which I mentioned that it appeared that demand for cardboard boxes was increasing and that was a positive sign.  The jobs numbers coming out of the US this morning were better than expected and gave lift to the futures market before the opening today.  Of course, the number is never "as it seems" so there will be some work looking into what really made that number up. But on the surface, it is looking more like the job spike number that I have mentioned many times may be upon us.  This is a very positive sign.  Now an economist (remember Stalin's joke about economists being very dangerous weapons) commented that she thinks unemployment may be persistently high for years.  Of course, negativity gets headlines.  The payrolls data is suggesting that the worst of the economic storm is over. 

On March 2nd I posted a comment to our website (emailed early to clients) calling for the end of the recession.  This generated more than a few chuckles as the markets were falling into a painful trough (the name of the piece).  Of course nobody knew that was the trough (so far anyway!) and it took me quite awhile to hit the send button on that email.  Actually, I usually consider it a bad sign if too many people agree with what I am saying, so the fact that I generated chuckles gave me more confidence in my view.  A great indicator of where we are in the cycle is the contrarian view.  If people want to stop adding money to their accounts (as has been quite prevalent of late), then we are usually at a bottom.  If people are willing to borrow as much as they can to invest, that is usually a top.  Unfortunately, this is why I have a few chuckles at the DIY discount broker types, you get what you pay for.  My point is simply that I pay no attention to the media's opinion on anything, nor should you.  There are many who leave BNN or CNBC on their televisions all day, I think the history channel might be a better guide.

Reassuring economic data this week reinforced hopes that demand will stabilize, while General Motors' long expected bankruptcy filing ended uncertainty about the automaker's fate (various governments and unions will own about 90% of the company while current bond and shareholders may own about 10% of the new company – GM has already announced the pending sale of certain assets including Hummer and Opel which is their European division to Magna International, a large Canadian supplier to the auto industry).  Although, the auto industry is very relevant to the overall economy it is no longer as relevant to global credit or equity markets and thus, investors are starting to largely ignore the developments in Detroit, Oshawa and Windsor.  Data showing that the U.S. manufacturing sector contracted in May at a slower rate than expected fueled hopes the U.S. recession that began in December 2007 is moderating.  Investors were also encouraged by signs of manufacturing stabilization from China, with demand from emerging markets for commodities and other resources seen leading a revival of global growth.

1. US Initial Jobless Claims - we watch the 4 week moving average which peaked in March at 659,000 and has been declining ever since, to 627,000.
2. ISM Manufacturing Index - rebounded from a 30 year low of 32.8 in December to 40.1 in April. A reading above 41.2 indicates an expansion in the overall economy, looks like we are heading there (although above 50 is more convincing)
3. US Consumer Confidence - also bounced off of a record low (since 1967) of 25.3 in Feb to 54.9 in May. This indicator has an 86% correlation with the year over year change in real consumer spending over the lasts 10 years (Haver Analytics).  Confidence is a funny measure, I believe it is far more influenced by the media than most would admit.  This was confirmed when I spent most of September to January explaining how the Depression unfolded, as the media flashed pictures of souplines to anyone who owned a television.
4. Credit spreads - CDX Index of Investment Grade Corporate CDS (IG11) has narrowed from a high of 279 in December to 179 today.
5. US Libor-OIS spread - similar to the TED spread, shows how much banks have to pay over the risk free rate to fund themselves. In calmer days was around 10bp, peaked at 354bp in October, now at 46bp which seems to be the new normal.
6. US Building permits - this indicator is a bit troubling since it is not confirming the recovery and continues to decline, posting a record low (since 1960) of 498,000 annualized, previous low was 709,000 in 1975.
7.  US pending home sales was up strongly coming in at: +6.7% when the consensus was +0.5%.  This is one indicator that may be a solid plus.  The sharp surge in April is the third consecutive monthly gain and should add to the green shoots trade.  * A huge surge in the Northeast (+32.6%) drove most of the rise.  The Midwest was up 9.8%, the south was flat (-0.2%) and the West was up 1.8%.  Even though the northeast distorted the headline, the fact that no region registered a significant decline is an added plus.

Oil
Goldman Sachs released a report this week in which they raised their target for oil from $65/bbl to $85/bbl, and gave a $95 target by the end of 2010.  They noted..."As the financial crisis eases, an energy shortage lies ahead...The recent rally in prices is likely to be the first stage in the oil price rally that we expect will accompany a recovery in (global) economic activity...(therefore) we are raising our end-of-year price forecast to $85 dollars per barrel from 65 dollars per barrel."

Steel
Steelmakers in China, via the China Iron & Steel Association (CISA), have been fighting for lower iron ore prices as they claim that the current slowdown in China is leading to weaker end-user demand.  Unfortunately for CISA, the macroeconomic numbers are telling a different story.  The Chinese purchasing managers index was above 50 (indicating expansion) for the third month in a row.  Also, China's iron-ore imports hit record volumes in March and April, and steel prices have been creeping higher since late April.  There may be changes to the current system of pricing iron ore contracts, but it appears that the large supplier of iron ore will be unlikely to settle on long-term prices much below the current level.

Credit Suisse strategist Andrew Garthwaite discussed in a report on Wednesday that their team believes that "the downside and upside risks to equities are now quite symmetrical and believe strongly that the lows have been seen."  One area of concern he mentioned was that "corporate equity issuance has surged to 2% of market cap - an all time high." On one hand, the improved access to capital markets via new debt and share issuance is encouraging, and was one of the necessary requirements that we need to see to confirm that we were on the path to credit market repair.  On the other hand, the rumblings that the equity issuance is concerning brings us to think we are seeing corporations who are 'damned if you do and damned if you don't'.  I think it is surprising how quickly a positive factor that we were looking for could turn into a worrisome factor.  I think it is also important to consider that the severe credit seizure that the markets endured have encouraged many companies to take advantage of the re-opening of credit markets.  The ability to refinance and raising money is very helpful in that I have seen some companies (that really did not need the money) raising money "for general corporate purposes" that could mean that acquisitions are coming back on the table.

Technically, the S&P500 held on to a very strong support level at 923/16 on Wednesday's pullback and has cleared resistance of 939/940 for another run at 1008/17.  This is a very strong technical signal that I have been looking for.  This does not mean that the equity markets go straight up from here, but the number of technical signals coming that look positive is reassuring.  Golden crosses are becoming evident in several areas, the MACD signals look fairly good, and the RSI indicators are still relatively neutal.