Right on Cue, Auto Sales Tank; Here’s What to Watch for Next …
The market’s focus on Friday was squarely on jobs. Investors apparently decided the employment situation was good enough that stocks should be bought, and the Dow edged ever closer to 18,000.
But is there something ELSE investors like you should be paying attention to? I think so. I’m talking about fading auto sales!
Frankly, the March numbers stunk up the joint. The seasonally adjusted annual rate of sales ended up coming in at 16.6 million. That missed the average forecast of 17.3 million by a country mile. It also represented a 3.1% drop from March and a drop of almost 1 million vehicles from February.
|March auto sales were the weakest since |
I’ve been focusing so closely on autos for the past several months because what’s going on in that industry has major implications for the economy. Just like with the broader credit cycle, the boom/bubble cycle in auto lending and leasing also appears to be taking a turn for the worse.
Specifically, auto-loan delinquencies and defaults are rising fast. That’s forcing lenders to begin tightening standards.
That, in turn, will put downward pressure on vehicle sales and upward pressure on already-bloated auto inventories. Companies like General Motors (GM), Ford (F), and Fiat Chrysler Automobiles (FCAU) will have to respond by cutting back on production and laying off workers, hurting U.S. GDP growth.
My advice? Stay away from auto stocks, many of which are vastly under performing the broader market. Several got hit hard Friday and today, even as the overall market rallied or remained relatively stable – and they look vulnerable to even sharper declines in the coming weeks and months if the auto-lending bubble continues to burst.