U.S. retail sales fell nearly 9% in March from the prior month, we learned this morning, with clothing sales down 50%. Industrial production sank 5.4%--the worst monthly decline since 1946--with motor vehicle production down by a third. Homebuilder confidence dropped from 72 to 30. The regional New York manufacturing gauge plunged to -78.2.
And as bad as these reports are, April's data will likely be worse. All in all, the 10-year Treasury yield is slipping again to roughly 0.66%, and the price of crude oil is back below $20. Economists are settling on a roughly -40% annualized drop for second-quarter GDP. "Equity bulls begin to wonder if it's time to press the pause button on the rally," Art Cashin mused this morning. "It might be."
Then again, some were bracing for worse. Jan Kniffen pointed to the drop in clothing sales, saying he'd expected closer to a 60-70% plunge. Excluding autos and gasoline, retail sales were "only" down 4%, suggesting somewhat more resilience than he'd thought. Meanwhile, homebuilder confidence at a level of 30 remains above the sub-20 readings that marked the housing crash and tepid recovery last decade.
Still, we're in for a couple absolutely brutal months of economic data and headlines. Almost every single one will be blaring "worst since the Great Depression"..."worst since World War II"..."worse than we saw in the depths of the Great Recession," etc. Probably the only way this won't panic the public is if the stock market remains relatively resilient throughout it, having priced in the standstill already and now looking hopefully towards some gradual reopenings.
It will almost certainly pressure Congress to do more, as well. Nearly all of the $350 billion in funds for the small business "payroll protection program" is already spoken for. We'll be following up on the story of Junior's Cheesecake in Power Lunch today, after owner Alan Rosen said he isn't yet using his millions in relief funds to pay workers, saving it for paying them later if business doesn't return to normal.
And I also expect attention to shift next to the Fed's "Main Street" support program, which they're hoping will run into the trillions of dollars, also distributed via the banks. I'm sure there will be a lot more hand-wringing over it, too. I do think the Fed is running a high risk here. As David Zervos said yesterday, the central bank is gaining power at the expense of its independence. We'll be talking to Greg Ip about that today.
Out of time! See you at 1 p.m...
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