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Wells Fargo Senior Economist Mark Vitner and Zacks.com Senior Equity Strategist Jared Levy on the outlook for the economy and its impact on the market...
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-- all right let's bring in mark baker -- Wells Fargo managing director at -- President Jared Levy.
Zacks dot com senior equity strategist -- -- good to see a happy Friday march 1 -- the manufacturing numbers.
They are in a contraction -- this might be temporary but that is the question.
Is this contraction in manufacturing a blip or -- sustaining go down further.
Well I I don't know if -- if contraction might feel might not be overstating it a certain was attacked us and I it is the technical term when it's below fifteen.
Contraction that is a term that we use it.
Yeah it is the technical term but it but it's but it needs to be well below fifty -- really threatens a recession in the economy and an -- and manufacturers to at least stalling out.
At and the reason I I brought -- -- tentative them that -- needed to be a little technical here is that we're very close to fifty.
In our forecast has the PMI rising dip to fifty point two and that's not good I mean -- that's that's that's the stall speed the factory sector.
But I think that's all we're going to see -- I don't think it's gonna get a whole lot worse than that.
But I don't think it's gonna get better in the next two or three months if you look at all of the manufacturing surveys.
That the -- the lead the the orders series.
Have been have been weakening for the last several months they're running well below the headline number.
So at the headline number may -- a little bit further may get down a 48 the next couple of months I think that's about as bad as it's going to -- I know I think of Richmond and Kansas City were the only region so far the look pretty decent but you have Milwaukee at Dallas Philadelphia not looking good New York either but market that -- is pushing here askew.
You know as as he looked forward to a stalled engine.
Usually -- need more gasoline or some type of electrical jolt to get it going again what we'll serve as that gasoline.
We don't -- -- -- -- give an -- we need we we.
We need a better engine and maybe a better driver.
But we don't -- -- gas the but I today is the if if you look at the factory surveys -- -- the things that really stands out is that the -- of the the parts of the country that are most exposed to Europe.
Are slowing almost.
Richmond had a pretty good number.
There's a lot of building products companies in the south and home building is doing a little bit better.
But the real gains in housing are likely to be this spring it's not going to be in the fall in the winter months.
So I'm afraid that the slowdown the factory sectors -- -- take GDP although we are 13 in the second quarter.
But in 17 in the third that you -- for the fourth -- one in the first.
Very weak economic numbers the next several months.
Jared let me bring you into the conversation do you think we can avoid a recession.
You know it's -- -- to mark's point he said all right you know we're not completely contracting but if you look at the -- the trends lower here's the point you need to think about.
Even at fifty even if PMI and ISM just sit there are fifty.
What is gonna deliver the market bigger earnings companies there are at peak margins right now you -- margins at 3060007.
Levels.
Without additional funds and revenues pumping in the stock market is at its upper big big disappointment next quarter.
I don't think we're nine point 5%.
-- growth and earnings what does that come from.
If you got a manufacturing you've got a catalyst in Europe Regina.
In my mind I just don't see the next step in order YC a big vote of confidence coming into the American consumer.
Maybe the election -- but that we got this -- let the sort of take out all the way on a little bit more.
Cautious I guess you will perhaps.
Of recession moving into the next quarter but you're not entirely inactive care if you do like certain names you'd say stay out of sectors but there are names of stocks that you feel are opportunities right -- can -- talk about some of those.
Yeah -- again we don't get blank those start to blanket the stock market down not buying the stock market or I am.
I think the areas of focus on are these number one is.
Look for stocks have relatively low expectations don't be buying the big growth companies out there buying stocks that low -- perhaps below sixty below fifteen.
And then also look at something called The -- ratio PEG.
Basically a lower peg ratio preferably below one point two that this means there's not a lot of growth baked into that company don't need to grow that much to keep their -- low.
And the sectors -- looking at were specifically.
-- the wireless broadband providers and companies like Skyworks Solutions I think there's a lot of opportunity there.
I like AMT remembers -- they had a great quarter they're rebuilding their towers Chicago Dallas Philadelphia these markets need new towers.
American tower providing that that's an area like and I like Qualcomm a gentleman talked before the close I like Qualcomm as well.
By the way Jerry you all week we had a pop I was talking about natural gas earlier it's up 18% for the month you still think natural gas -- a -- -- I love I love it I've been an -- David you know we've talked about this over the past several months I've been -- table natural gas.
Here's the deal.
When you sort of look at the way were converting you know at T.
Boone Pickens is obviously made a big push for betacast.
We are changing the way that we utilize natural dry spell out clearly -- I got into a taxi -- today.
It was that it it had a different feel to with the engine did and I asked -- driving said I have a natural gas and he converted to natural gas.
They're too they're only two stations in the Manhattan area there's one in north Manhattan.
One in south -- he says he saves 50%.
On his gas bill every week so there it you -- begin you're beginning to see this which show.
Yes and and by the way the -- you really -- a great point fleets and not just taxes which I think is gonna be the next ways specifically New York but.
Fleets you know -- all these different fleets of trucks they are all gravitating towards natural gas and by the way shipping LNG overseas is a lot of rumblings about that -- exported.
Guess -- that does the price it only moves that higher FedEx Waste Management job -- we finish subscriber station what does that number one piece of data you're going to be looking at could could we assume it's the jobs report for the month of September or is that something else well.
ISM going to be up first renewal -- you testified management and institute for supply management and and we need to see some improvement off of where we -- -- recently we've had some really weird production schedules in the auto sector.
I'm looking at that new orders component in the unfilled orders component.
It is both of them of -- weakening and if they continue to slide -- that that is that that increases my discomfort level that on Friday and and you got to look at employment and you know we always do.
It's been a weird thing that that the kind of figure were looking for a 1151000.
Jobs be created -- But the unemployment rate to be unchanged -- when you look at the jobs number look at the composition.
What kind of jobs are -- -- 40% of the jobs we've been adding since the recession and -- -- since we started adding jobs in February 2010 have been in low wage industries.
Retailing hospitality.
Temporary services home health -- that's what we have no income growth.
You guys are terrific great advice great suggest.
