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TWO-FER TUESDAY: EMPIRE STATE, HOMEBUILDER SENTIMENT

Investors eased into their holiday-shortened week with a generally benign data duet, both of which point to a slight loss of economic momentum.

Starting with regional manufacturing, factory activity in New York State has continued to expand this month, and slightly faster than analysts anticipated.

The New York Fed's Empire State index USEMPM=ECI landed at 7.1, marking a slight deceleration from January's 7.7 but a shade north of the 7.0 consensus.

A positive Empire State reading indicates monthly expansion; a negative print signifies contraction.

Below the surface, new orders and inventories increased, shipments held steady, and employment rebounded. But input prices - an inflation predictor - gained some heat.

"Manufacturing activity continued to expand modestly in New York State in February," says Richard Deitz, economic research advisor at the New York Fed. "Firms remained optimistic that conditions would continue to improve, with employment expected to grow."

On Thursday, the Philadelphia Fed will release its Philly Fed manufacturing report, which should help flesh out the picture of the current month's Atlantic region factory activity.

Moving to the housing market, the mood among homebuilders has grown a bit gloomier this month.

The National Association of Homebuilders' USNAHB=ECI housing market index (HMI) unexpectedly shed one point to print at a dour 36, defying economist predictions of a one-point move in the opposite direction.

Either way, builder sentiment remains sour, languishing well south of 50, the dividing line between pessimism and optimism in the sector.

“Builders reduced their expectations for future sales as buyers report affordability challenges, which is contributing to declining consumer confidence for the overall economy,” writes NAHB Chairman Buddy Hughes. “While the majority of builders continue to deploy buyer incentives, including price cuts, many prospective buyers remain on the sidelines."

Indeed, with building permits in steady decline, new home sales weakening and 30-year fixed mortgage rates coasting above 6%, there's little to coax would-be homebuyers into the fray.

(Stephen Culp)

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