Wednesday, November 23, 2011
Given Thursday's Thanksgiving holiday and the abbreviated trading
session on Friday, a lot of major economic releases have been
squeezed into today's session. And despite the overall positive
tone of this morning's U.S. economic releases, the market will
likely remain fixated on the negative headlines from across the
pond in Europe. This effectively ensures that stocks will sustain
the downtrend of the last few days in another low-volume trading
session today, bucking the typical favorable market action of the
day before Thanksgiving.
In Europe, Germany held a surprisingly less than inspiring auction
for its bonds, raising questions that investors may be fleeing from
the safest credit in the Euro-zone as well. The country was able to
sell only €3.6 billion of the €6 billion on offer, a very unusual
lack of demand for German bonds (also known as bunds). Bond yields
are rising elsewhere in Europe, where new questions are being
raised about the bailout of Franco-Belgian bank Dexia. Belgium is
reportedly unable to meet its share of the bailout obligations,
which will only add to pressures on the French treasury, which is
already working hard to protect its triple-A credit rating.
The continued unsettled sovereign debt crisis is weighing on the
broader Euro-zone economic outlook as well. We found last week that
the broader Euro-zone GDP barely eked out a positive growth number
in the third quarter and the outlook for the current quarter
appears be even weaker. Today's weak composite purchasing managers
) reading for the union is pointing towards a Euro-zone recession.
We also have a weak PMI reading out of China today.
Unlike the European situation, the picture in the U.S. is quite
favorable. This morning's economic data dump provides a mixed
picture, but it is unmistakably more positive than what we had been
seeing a couple of months back. The Durable Goods report came in
better than expected, while the Personal Income & Outlays
reading was a bit on the mixed side, with Personal Income coming
ahead while spending came short of expectations. The Initial
Jobless Claims numbers were also a tad weaker than expected,
increasing by 2K during the week to 393K. But the key thing on the
Initial Jobless Claims front is that it remains below the 400K
level, which is overall positive.
The takeaway from today's economic releases is that the outlook for
the U.S. economy has moved in the recent past beyond the
recessionary talk. While this data shows that the economy is
clearly not heading towards a recession, it is less than helpful in
handicapping the extent of its underlying momentum. And
developments on the domestic political front and in Europe do not
help in that effort, either.
On the earnings front, we
come out with better-than-expected results this morning and guided
higher. We also have positive results and guidance from
, the maker of digital video recorders.
, the online music service, came out with positive quarterly
results, but its guidance fell short of expectations.
Director of Research
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