MMI Marcus and Millichap Inc

There is a tug of war between two competing visions of the economy: one is looking for a recession, while the other is expecting the economy to continue chugging along in positive territory. Last week's see-saw movement in the stock market was essentially a reflection of this tension.

I don't think we are heading towards a recession, though it may be awhile before this issue gets settled. There is enough momentum in the economy's underlying fundamentals to keep it from going into negative territory. Last week's positive retails sales and jobless claims numbers, coupled with the recent pullback in oil prices, are indicative that consumer spending has likely improved from the second-quarter's anemic pace.

We have a busy economic calendar this week, though few of the reports can give us definitive answers on the recession question. The two regional manufacturing surveys this week, the Empire State this morning and Philly Fed on Thursday, come close to providing a preview of the national ISM manufacturing report for August.

The New York Fed's Empire State survey came in weaker than expected this morning, for the third monthly negative reading in as many months. All the major sub-components of the index were in the negative territory, though the employment component remained modestly positive. While this report pertains to New York State only, it does provide some evidence that conditions in the manufacturing sector are difficult.  

In corporate news, we have a number of M&A deal announcements this morning. The most important of these is Google's (GOOG) acquisition of Motorola Mobility (MMI) for $12.5 billion in cash, a 63% premium to MMI's Friday closing price. This deal gives Google a complete platform, from software to hardware, to more effectively compete in the mobile handset space.

In other deal announcements, Transocean (RIG) is aquiring Norway's Aker Drilling for $1.43 billion in cash. Aker owns two ultra-deepwater drilling rigs and has two other units under construction. Time Warner Cable (TWC) is acquiring Carlyle-owned cable operator Insight Communications for about $3 billion.

The second quarter reporting season is almost over, though we still have a number of the retailers to report. We got a mixed report this morning from Lowe's (LOW), beating on EPS but coming short on revenue. Home Depot (HD) reports on Tuesday.
 
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