Early reports from US auto manufacturers suggest that the industry will beat strong sales figures recorded in December 2016. With three manufacturers (~25% of market share) reported, individual OEMs are coming in ahead of analyst estimates with Ford and Audi both producing strong results. When translated to seasonally adjusted annual sales rates, the first three reports track to a sales pace of about 18.2mm SAAR. That compares with 18.3mm SAAR reported last month and economist estimates of about 17.5mm SAAR. As we get more reports throughout the day, we will update the table at right and charts below.

Update 1 9:40 AM: A bigger than expected drop for GM sales (3.8% versus the 2.4% decline forecast by analysts) led to a big swoon in our tracker. We are still showing the industry on pace to beat analyst estimates in the first month of 2017 but by a much narrower margin of +250,000 SAAR.

Update 2 10:15 AM: With over half the industry now reported, our tracker is indicating the US auto industry will miss analyst sales estimates in January, a huge shift from the big beat we were tracking an hour ago! As shown in the chart below, big sales pace declines from GM and Fiat-Chrysler contributed to the slowdown. That said, it could have been worse; while the Fiat-Chrysler sales numbers were down YoY, they were estimated to be 14% lower rather than the more digestible 11.2% decline reported.

Update 3 10:51 AM: While Mazda and Volkswagen delivered decent sales prints, both seeing double-digit YoY volume gains, Toyota announced an absolutely brutal miss with sales falling 11.3% YoY versus 2% declines expected. Now, with 75% of US auto sales market share reported, it’s very unlikely that the overall sales pace will be able to beat analyst estimates even if smaller, later-reporting companies generate large sales gains like those we’ve seen for Nissan, Audi, Mazda, and VW.

Update 4 1:57 PM: Since our last update, virtually all of the remaining market share has come in, with only Mitsubishi remaining unreported. While Subaru and Honda both reported solid months and the high end (Mercedes, Porsche) performing well, BMW and Hyundai saw middling sales while Kia reported a pretty soft result. Overall, it’s a slight positive given seasonal adjustments and we’re now tracking a bit of an improvement versus our last updated of 17.11mm SAAR. With 98% reported, auto sales should miss estimates and come in around 17.36mm to start 2017.

Consumer Confidence for the month of January was released earlier today, and after hitting the highest level in over a decade last month (August 2001), sentiment saw a slightly larger than expected pullback.  While economists were forecasting the headline reading to come in at 112.8, the actual reading printed at 111.8.  As shown in the chart below, though, this month’s decline barely registers relative to the move we have seen in the past few months, and sentiment remains comfortably above its historical average of 93.6 dating back to 2000.

What really stood out in this month’s report is how confidence varied by income level.  As shown in the chart, for all three income levels, sentiment surged post-election.  However, the only income level where sentiment hit a new high was in the middle-income level of consumers with incomes of $35K to $50K.  Among many political scientists, this is the heart of President Trump’s base and consists of the  “Forgotten Man” among the US population.  The term “Forgotten Man” was first coined in an essay by William Graham Sumner.  In a nutshell, when the rich see an injustice from which the poor are suffering, it is often the people in the middle who bare the burden of the remedying of the situation.  Trump took this theme and campaigned on the idea that while traditional Republicans were the party of the rich and Democrats were increasingly focused on catering to lower income Americans, no one was fighting for the middle class.  Given the results of the election, it only makes sense that confidence among this group has seen the biggest improvement since Trump.  Whether their confidence continues remains to be seen, but for now, the “Forgotten Man” is still with Trump.

The S&P 500 is on pace for its fourth straight day of losses which would mark the longest losing streak for the index since the election (leading up to the election, through 11/4, the index was down for nine straight days).  While the four-day decline has been relatively modest, whenever equities slump we like to see how things in the high yield market are playing out in order to see if there are any warning signs in this area of the fixed income market.  Historically speaking, spreads (yield premium over treasuries) on high yield debt have been inversely correlated to the equity market.  In other words, when spreads on high yield debt increase, equities usually decline, and vice versa.

Taking a look at the chart below, spreads on high yield debt have narrowed significantly over the last year.  After hitting a peak of 887 bps back in February of last year, spreads contracted by more than half through their recent lows which occurred last Friday at 393 bps.  In yesterday’s trading, spreads widened a bit, which is understandable given the increased risk aversion in the market.  However, with an increase of just 3 bps, like the equity market, high yield debt markets aren’t showing a high degree of concern at this point.

The S&P 500 fell 60 bps Monday and is now down a whopping 0.76% from its most recent closing high last Wednesday.  At this point, the current “sell-off” ranks as the third largest peak to trough decline from a closing high since the Election.  As shown in the chart below, another couple of days like the last two and the current pullback could end up being the largest post-election decline since Trump became the President-Elect and subsequently President.

So is the rally over?  Who knows.  However, a look at the headlines from a lot of major media outlets that cover the market suggests that the answer is obvious — Yes.

The normally bullish Investors Business Daily (IBD) still isn’t sure and posed its headline in question form:

Same goes for CNN:

While IBD didn’t take a stand in either direction, other outlets were a lot more definitive in their headlines.

Fox Business reports that investors are having second thoughts on Trump:

Both Marketwatch and Reuters are calling an end to the honeymoon:

Not only is the honeymoon over, but based on the Wall Street Journal’s headline, the market and Trump may be heading straight for divorce.

Finally, if Bloomberg’s account of today’s sell-off is any indication, the divorce may be messy as today’s 0.6% drop only emboldened “Trump’s Haters.”  We can only imagine how messy things would be if the S&P 500 actually fell a full percent!