Morning Report - NFIB Pessimism

Vital Statistics:

	Last	Change	Percent
S&P Futures	1454.8	-1.0	-0.07%
Eurostoxx Index	2703.9	8.4	0.31%
Oil (WTI)	93.5	0.3	0.33%
LIBOR	0.305	0.000	0.00%
US Dollar Index (DXY)	80.37	0.113	0.14%
10 Year Govt Bond Yield	1.89%	-0.01%
RPX Composite Real Estate Index	192.2	-0.2

Markets are lower this morning as we kick off 4Q earnings season. Alcoa officially begins the parade after the close. Bonds and MBS are up small.

The NFIB Small Business Survey for January ticked up slightly in December after falling off a cliff in November.  The current level of 88 is a recession-level reading.  Capital Spending is still in maintenance mode. Employment growth is flat. Housing, energy, and autos (the average age of a car is over 10 years) look to be the drivers of growth in 2013. But, overall, it was a glum report.

Chart:  NFIB Small Business Optimism:

The National Association of Home Builders Improving Market Index rose to 242 (out of 361 MSAs total) in January from 201 in December. This strength during a seasonally weak period bodes well for the summer selling season and confirms our view that housing bottomed about a year ago. Rentals are still booming as rents increased 3.8% YOY last quarter.  The vacancy rate dropped to 8%.

Could the East Coast get a break in gasoline prices?  Currently, the East Coast refineries use North Sea Brent crude oil, which trades at a premium to West Texas Intermediate, which is the source for West. Burlington Northern will boost crude oil shipments by 40% this year (primarily Bakken shale oil), and is looking to ship east to supply refineries on the Eastern Seaboard.  As coal shipments decline, oil is taking their place. Since railroads have more flexibility than pipelines, the continental US energy market will become more equalized.  Good news for the East Coast.

A new study shows that we may hit the debt ceiling sooner than expected, around Valentine's Day (how romantic). Obama has said that the debt ceiling is non-negotiable. My sense is that Republicans will cede the debt ceiling point and use the sequestration or the expiration of the government's operating budget to push through spending cuts.  As a plan B, the trillion dollar coin is still being bandied about, particularly by the Krug Man and Greg Sargent (who talks to NYPD hostage negotiators, instead of economists, apparently).