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, it 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 smooths 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 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 its fast-declining competitive position.
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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