MORE PANIC IN THE PITS AND ON THE STREET

CREDIT CARD PURCHASES ACCELERATING

500,000 LAYOFFS PREDICTED FOR 1996

THE FINAL TAKE ON THE FOURTH QUARTER

In case you took a three-day weekend and missed my article last Friday, here's a recap of the parts that were particularly pertinent to today's market action:

"When today's employment report came out, the nervous nellies trading the bond markets panicked and drove the rate on the 30-year T-bond from 6.66 percent to 6.83 percent. This made even less sense than last month's rout, because today's reported employment change was not even all that unusual. When we compare the March gain of 140,000 with the January-February average and with monthly changes going back to last June we find that 6 out of the past 9 months have had greater monthly gains than the change for March.

Thank goodness the stock market wasn't open today. Even though I am fully confident in the long-term prospects for all my stocks, it still hacks me off when they all lose a couple dollars per share due to the actions of a bunch of panic-stricken bozos. Maybe the three-day weekend will give stock market participants a chance to pause and reflect on the facts of the situation, and they will decide to behave rationally when Monday morning rolls around. Hope springs eternal."

So much for reflection and rationality! The bozos bombed both the stock and bond markets today. But, as I said on Friday, I'm fully confident in the long-term prospects for all my stocks. I know the reasons why I bought them, and those reasons are still valid. It's too bad everyone can't say that. If they could, they wouldn't have behaved the way they did today.

Now, on to the Economic News --

The Federal Reserve reported late Friday afternoon that Consumer Installment Credit outstanding increased at a 13.9 percent seasonally adjusted annual rate in February, a bit above the pace of recent months. Growth was strongest in the revolving credit (credit card) category, which expanded at a 19.0 percent pace. Auto credit and "other" credit expanded at annual rates of 10.3 percent and 11.3 percent, respectively.

February marked the 33rd consecutive monthly rise in consumer installment credit. The total amount of outstanding consumer credit now stands at $1,047,700,000,000.00.

It looks like credit card users took a breather for a few months, but they seem to have returned to their old spending habits. From March through June of last year the revolving credit growth rate averaged 23%. Then, from July through November, the average rate dropped to 11.3%. In the most-recently-reported four months, revolving credit accelerated from a growth rate of 9.1% in November to 15.7% in December to 17.0% in January to 19.0% in February. At this rate we'll soon be back up to the 23% annualized growth rate of a year ago. It looks like credit card users are currently doing their bit to push up the level of economic activity.

On the other side of the coin, a report today by the personnel firm Challenger, Gray and Christmas indicated that the spending plans of 168,695 consumers might have been altered during the first quarter of 1996. These were the 168,695 employees who had their jobs eliminated during this three-month period. This first-quarter job-cut figure was 74 percent higher than the number for the same quarter last year and was the highest quarterly number in two years. The telecommunications industry led the way with 42,582 job cuts, followed by the retail sector with 16,040 and the computer industry with 13,376. Challenger, Gray and Christmas forecasts that businesses will eliminate 500,000 jobs during 1996.

The Commerce Department reported today on the fourth quarter profits of U.S. manufacturing firms. In the fourth quarter, manufacturers showed a 5.1 percent profit on sales. This was down from 5.8 percent in the preceding quarter, and down from a 6.2 percent level in the fourth quarter of 1994. From the third to the fourth quarter the profits of durable goods producers rose by 5.27 percent; but, producers of non-durable goods experienced a profits falloff of 22.90 percent.

The Commerce Department also reported today on the profits of large retail companies with assets greater than or equal to $50 million. In the fourth quarter these firms showed a 1.8 percent profit on sales. This was slightly better than the margin of 1.6 percent in the third quarter; but, significantly lower than the 3.1 percent profit margin realized by these firms in the fourth quarter of 1994.

Today's Commerce Department reports provide a final snapshot of the manufacturing slowdown and the lousy holiday retail sales that we observed on a week-by-week and month-by-month basis back in the latter part of 1995. Now we have the numbers to quantitatively describe exactly what happened in terms of the profitability of the sectors that were involved.

Byline: Lafferty (MF Merlin)