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March leading indicators fall 0.2% as expected

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The major indexes have given back earlier gains and now traded unchanged to lower after this morning's release of economic data showing the leading indicators index fell 0.2% in March, which was inline with economists expectations.

The Conference Board said its leading indicators index fell 0.2% in March after falling a revised lower 0.5% in February as 5 of the 10 leading indicators (building permits, jobless claims, interest rate spreads, money supply and consumer confidence) fell/weakened in March.

The leading indicators index now stands at 110.6 (base of 100 established in 1996). During the 6-month span through March, the leading index increased 0.2%, with 3 of the 10 components advancing.

Two of the four indicators that make up the coincident index increased in March. The positive contributors to the index, beginning with the larger positive contributor were personal income less transfer payments and manufacturing and trade sales. Industrial production and employees on nonagricultural payrolls declined in March.

The coincident index now stands at 115.3. Based on revised data, this index decreased 0.2% in February and increased 0.3% in January. During the six-month period through March, the coincident index increased a modest 0.1%.

The lagging index decreased 0.1% to 99.2 in March, with two of the seven components declining. The negative contributors to the index, beginning with the larger negative, were commercial and industrial loans outstanding and change in labor cost per unit of output. The positive contributors to the index were average duration of unemployment, change in CPI for services, and ratio of manufacturing and trade inventories to sales. Ratio of consumer installment credit to personal income and average prime rate charged by banks held steady in March. Based on revised data, the lagging index decreased 0.2% in February and increased 0.2% in January.

The Conference Board's leading index was designed to forecast economic trends 3 to 6 months in advance, and has been relatively flat since December 2001.

Ken Goldstein, and economist at the Conference Board said, "the flatness in the leading index suggests that the U.S. real gross domestic product (GDP) growth will most likely stay in the +2% to +3% range for now." Goldstein added that "as long as economic growth is constrained in this range, the labor market cannot improve."

Current trade has the Dow Industrials (INDU) 8,341 +0.03% holding onto a 2-point gain with a session high early this morning of 8,397.95 slipping to a low of 8,301.94 after the release of the March leading indicators report. Shares of telecom service provider SBC Communications (NYSE:SBC) $20.15 -2.28% leads Dow losers, while Merck (NYSE:MRK) $57.05 +2.07% leads gainers after reporting Q1 (March) EPS of $0.76, which was inline with analysts estimates earlier this morning.

The broader S&P 500 Index (SPX.X) 892.48 -0.12% trades down 1 point after achieving a morning high of 898.01, but off its lows of 888.17 with mixed sector action. Sector strength has the CBOE Internet Index (INX.X) 109.43 +1.67% along with the Gold/Silver Index (XAU.X) 67.98 +1.4% and Natural Gas Index (XNG.X) 178.69 +1.37% the only sectors posting greater-than 1% gains, while the Airline Index (XAL.X) 35.11 -3.57% helps drag the Dow Transports (TRAN) 2,303 to a 1% loss as parent of American Airlines AMR Corp. (NYSE:AMR) $4.02 -19% falls after labor unions now threaten to repeal their recent votes in favor of cost cutting and member concessions. At issue is an enhanced management compensation plan which was not disclosed to the SEC until after the original deadline for voting on the concession packages. The issue is not the amounts, but the potential "bad faith" exercised by management (not unionized) by not disclosing perks at a time of company-wide sacrifice.

The narrow NASDAQ-100 Index (NDX.X) 1,080 -0.32% is off 3.5 points with the bulk of technology sectors showing mixed results, with the Disk Drive Index (DDX.X) 81.78 -0.8% exhibiting marginal weakness.

Jeff Bailey

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