There is nothing in this morning's data to bring the market out
of its somber mood of recent days. In fact, both of this morning's
economic readings - the final GDP read on the fourth quarter of
2011 and the weekly initial Jobless Claims - came in weaker than
expected. The soft earnings report from
) and murmurs of concerns about Spain will not help sentiment
The Commerce department's final read on the fourth quarter 2011
GDP turned to be non event, as the growth rate was left unchanged
at 3%. The internals of the report remained largely unchanged as
well, with personal consumption expenditures (or consumer
spending) remaining at 2.1%. With the first quarter of 2012 coming
to an end, this morning's final read on the last quarter of 2011
may seem like inconsequential record keeping. But there were good
reasons to expect an upward revision in the growth rate given
strong retail sales data in December. The hope was that an upward
revision to the GDP growth rate will have a bearing on current
quarter growth expectations.
It will be interesting to see the February consumer spending
numbers coming out in Friday's Personal Income & Outlays
reading. Given the recent improvement in the labor market, one
could reasonably expect favorable momentum on the household
spending front. We will get more confirmation of the labor market
momentum in next week's March non-farm payrolls numbers coming out
next week, but today's Jobless Claims report will keep the hopes
This morning's initial Jobless Claims reading came in a tad
weaker than expected, but the overall level remained in favorable
vicinity. There was a drop of 5K in initial claims last week to
359K, though the drop was from a upwardly revised 364K level. This
means that last week's initial claims were actually 16K higher than
the originally reported 348K level. The four-week average, which
smoothes out the week-to-week fluctuation, dropped by 3.5K to 365K.
The rise above the psychologically significant 350K level
notwithstanding, the overall trend in initial claims remains
favorable and at its lowest level in four years. Historically,
initial Jobless Claims at these levels have been associated with
strong gains in the monthly government non-farm payroll report. We
have been confirmatory evidence of that over the last three months
and will be getting the March reading next Friday.
In corporate news, Best Buy came ahead of earnings expectations,
but missed on the top line and comp sales. The company indicated
what appears to be a significant shift in its strategic direction.
The electronics retailer has been struggling to come out with a
winning strategy in the current web-centric consumer environment.
They are announcing store closings and greater emphasis on the
small format stand-alone locations. Best Buy has been struggling to
effectively compete against
) in the increasingly competitive space and it is unclear if these
steps will be more effective.
To read this article on Zacks.com click here.