Thursday, June 14, 2012
The headlines out of Europe today don't look good, with a rating
downgrade of Spain pushing yields on Spanish government bonds to
new Euro-era highs, further restricting the country's capital
market access. Italy is not far behind Spain either. While Italy
was able to successfully complete a bond auction today, but had to
pay substantially higher rates to attract the demand.
Stocks have held up relatively decently in recent days despite
the steadily worsening Euro-zone situation, likely reflecting hopes
of further Fed support. It will be interesting to see how stocks do
today, with today's initial Jobless Claims and the May inflation
broadly in the QE-friendly column.
Initial Jobless Claims went up by 6K last week to 386K. But
since last week's tally was revised upwards by 3K, the 'real'
increase is for 9K. The four-week average, which smoothes out the
week-to-week volatility, increased by 3.5K to 382K. For the last
many weeks, we have been hoping for this series to start going down
towards the 350K level. But it seems to be 'stuck' around the 380K
level, refusing to go down. This is the clearest sign that the
labor market has clearly lost the momentum that it was showing
earlier this year.
It is difficult to say whether this morning's Initial Jobless
Claims report will be enough to tip to the Fed over to announce
more support in its meeting next week, but this report nevertheless
provides further confirmation of the disappointing trend
established by the last three monthly non-farm payroll reports. I
would think that with inflation essentially a non-issue as today's
CPI reading shows, the Fed will be willing to provide further
support given the potential for negative shocks coming from
Europe.
In corporate news,
Kroger
(
KR
) came out with better than expected results and raised full-year
guidance.
Smithfield Foods
(
SFD
) came up short of expectations, as higher costs weighed on
margins. In other news,
Nokia
(
NOK
) announced major layoffs as part of a major restructuring
initiative to improve fast declining competitive position.
Sheraz Mian
Director of Research
KROGER CO (KR): Free Stock Analysis Report
NOKIA CP-ADR A (NOK): Free Stock Analysis
Report
SMITHFIELD FOOD (SFD): Free Stock Analysis
Report
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