Another day, another underwhelming economic report. Today's
reading of weekly Jobless Claims data appears even more
disappointing than what we saw yesterday from Automatic Data
). But the key number is tomorrow's jobs report from the
government's Bureau of Labor Statistics (BLS), expectations for
which have been coming down post-ADP.
Also in play in today's trading session are interest rate
decisions from the European Central Bank (ECB) and Bank of Japan
(BOJ). The ECB decision came in as expected, with no interest
rate cut despite the widespread economic pain in the currency
union. But the BOJ more than came through with what the market
was looking for.
The new governor of the Bank of Japan is leaving no stone
unturned by taking a leaf out of the Bernanke playbook and
announcing an aggressive easing program to fight entrenched
deflationary expectations. Japanese stocks have been the best
performing this year of all developed markets in anticipation of
this BOJ move. But given the positive surprise in today's
announcement, they may have some more room to run.
Yields on Japanese government bonds were quite low to begin
with, but will likely come down even further following this
aggressive action by the BOJ. The Japanese Yen which had been
weakening relative to the Euro and the dollar in anticipation of
this move will likely fall some more. That's a problem for
Europe, which it's rate decision today fails to address. Perhaps
Draghi can paint a future outlook in his press conference that
can anchor expectations. But hard to envision the markets
responding to mere talk.
On the home front, today's Jobless Claims numbers provide
another worrying sign that the economy may be moving towards a
'Spring Swoon'. Initial Jobless Claims jumped by 28K to 385K,
erasing weeks of gains in one move. The consensus expectation was
for a modest drop. The four-week moving average went back above
the 350K level - increasing by 11.3K to 354.3K. The surprise jump
could be due to seasonal adjustement issues related to Easter and
the Spring break, but we will have to wait a couple of more weeks
to decipher that.
Today's disappointing data comes after the weak ADP and the
two ISM surveys. The claims miss is not relevant to tomorrow's
BLS report as the survey week doesn't correspond with the BLS
survey period, but it is nevertheless a further sign that the
economy may have started losing momentum in March after strong
gains in the first two months of the quarter. As a result,
expectations for the BLS jobs report tomorrow have started coming
down from the original 200K.
I wouldn't expect the market to resume its positive momentum
in the absence of unequivocally positive economic data. That's
what we should expect to justify the market's record levels. But
what we are seeing instead is far from unequivocally positive, or
even just positive. It's actually negative. Let's see what Friday
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