Courtesy of Pam Martens.
By Pam Martens and Russ Martens: August 17, 2015
After overnight chaos in emerging market currencies, which are still reeling from China’s devaluation of its Yuan, the New York Fed further rattled markets at 8:30 a.m. this morning with a stunning manufacturing report showing that business conditions in New York fell off a cliff in its latest survey. The New York Fed writes:
“The August 2015 Empire State Manufacturing Survey indicates that business activity declined for New York manufacturers. The headline general business conditions index tumbled nineteen points to -14.9, its lowest level since 2009. The new orders and shipments indexes also fell sharply, to -15.7 and -13.8 respectively, pointing to a marked decline in both orders and shipments. The inventories index dropped to -17.3, signaling that inventory levels were lower.”
Adding to market angst this morning, the U.S. benchmark crude oil, West Texas Intermediate, was trading below $42 a barrel, raising renewed concerns that the Federal Reserve’s prediction that the collapse in energy prices would be transitory was little more than wishful thinking.
But the biggest cautionary warnings – rising junk bond yields and the rising spread in yields between junk and U.S. Treasuries – are commanding far less attention than they should be. Widening credit spreads served as an early red flag to the 2008 financial crash and implosion of iconic Wall Street firms.
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