Morning Report - Capex spending around the corner?

Vital Statistics:

	Last	Change	Percent
S&P Futures	1556.5	0.5	0.03%
Eurostoxx Index	2732.2	-12.5	-0.46%
Oil (WTI)	93.69	0.7	0.71%
LIBOR	0.28	0.000	0.00%
US Dollar Index (DXY)	82.27	-0.334	-0.40%
10 Year Govt Bond Yield	2.04%	0.01%
RPX Composite Real Estate Index	193.5	0.0

Markets are flattish this morning after a week of strong gains. The CPI came is a little higher than expected mainly due to higher gasoline prices. Since the Fed is pretty much solely focused on the unemployment rate, this is not going to be a market-moving number. Industrial production rose, while capacity utilization increased to 79.6%. Bonds and MBS are flat.

Chart:  Capacity Utilization Rate:

The Empire State Manufacturing Survey reported that conditions for manufacturers in the NY area continued to improve modestly. The 4 month outlook showed increasing optimism. Input prices rose, while selling prices remained flat. The employment indices remained sluggish. Manufacturers indicated that they were increasingly willing to take on debt and for the first time since 2008, reported that they expected their cash holdings to decrease. Capital Expenditures have been in maintenance mode since the crisis, and this may portend a shift. As we have seen in the chart above, capacity utilization rates are approaching "normalcy," which means that businesses are starting to plan capital expenditures for better days ahead. All in all, things are starting to line up for a normal expansion.

The Senate has released their report on the JP Morgan's London Whale loss. "The Subcommittee's investigation has determined that, over the course of the first quarter of 2012, JPMorgan Chase's Chief Investment Office used its Synthetic Credit Portfolio (SCP) to engage in high risk derivatives trading; mismarked the SCP book to hide hundreds of millions of dollars of losses; disregarded multiple internal indicators of increasing risk; manipulated models, dodged OCC oversight; and misinformed investors, regulators, and the public about the nature of its risky derivatives trading." The "misinformed" charge is a hefty one and will certainly be a focus at the hearing this afternoon. Separately, the Fed said it had found "weaknesses" in JP Morgan's capital plans, which means JP Morgan won't be able to pay any special dividends or conduct stock buybacks. 

President Obama met with Republican leaders and offered them entitlement cuts:  Chained CPI for Social Security and means-testing Medicare, but insisted they cough up new revenues. We'll see if any grand bargain comes out of it.