The weekly Jobless Claims data this morning completely erased
the strong gains from last week and then some, which makes one
wonder about the underlying health of the U.S. labor market. But
irrespective of how one interprets the week-to-week volatility in
this series, all agree that the economy has downshifted materially,
and that negative trend is showing up in the economic numbers.
I described last week's Jobless Claims report as "dramatically
positive" when it showed a 26K drop. And the only appropriate way
to describe today's reading would be to call it "dramatically
negative" as it shows a jump of 34K to 386K. Hard to tell whether
last week's reading was the outlier or this week's was, but the
picture emerging from this level of volatility is not
inspiring.
The four-week average, which smooths out the week-to-week
volatility, dropped by 1500 to 375.5K. Hard to make sense of these
numbers, but seasonal factory closings in the auto sector when the
automakers adjust their factories for next year's models could be
at play here.
Bernanke was non-committal in his Congressional testimony this
week, but many in the market continue to hope that another round of
QE may not be that far off. Labor market readings along the lines
of what we saw this morning will only feed those expectations. But
QE hopes may not be the only reason for why stocks have been
showing signs of life lately.
The corporate profitability picture may be as grim as many of us
had started suspecting. The earnings growth numbers don't look very
impressive, but what matters more is how the earnings and revenue
numbers look relative to expectations. Importantly, the market has
been particularly concerned about what management teams see for the
coming quarters. And on those fronts, the reports we have seen thus
far are not materially weaker than what we saw in the first
quarter.
Admittedly, this is still in the early-going, as more than 80%
of earnings reports have yet to come, but corporate profits are not
falling off the cliff. We saw this with
IBM
(
IBM
) and
Intel
(
INTC
), bellwethers for tech spending, and also banking giants
J.P. Morgan
(
JPM
),
Wells Fargo
(
WFC
) and
Citigroup
(
C
). That said, top-line gains are getting hard to come by due to the
synchronized global economic slowdown and the dollar strength is
having a material impact on companies with substantial
international exposure.
Today's economic releases include
Leading Indicators
which is expected to decrease by 0.1% and
Existing Home Sales
, both of which are scheduled for release at 10:00 AM EST.
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