Thursday, June 21, 2012
This morning's weak Jobless Claims data provides another
reminder of the labor market's recent loss of momentum. Growth
worries come through from headlines about China as well, with a
private sector reading confirming the weakening trend in that
country's manufacturing sector. The Fed acknowledged these growth
concerns on Wednesday, when it significantly downgraded its GDP
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Initial Jobless Claims dropped by 2K to 387K last week. But since
the preceding week's tally of 386K was revised upwards by 3K, we
actually have a modest increase. The four-week average, which
smoothes out the week-to-week volatility, increased by 3.5K to
386.8K. This week's Jobless Claims data pertains to the survey week
for the June non-farm payroll numbers that will come out early
July. And these numbers confirm that the June jobs will be along
the lines of what we have been seeing in the last three months.
Europe as a problem has been with us for a while now, but this
synchronized global slowdown appears to be becoming an even bigger
issue. We are not seeing this issue play out fully in the equity
markets yet, but the oil market seems to be appropriately pricing
it. Stock market investors appear to be holding out hope that
central banks would be able to stem the slide. The Chinese have
started implementing some stimulative measures and this morning's
HSBC 'flash' PMI results show that they will need to do more.
On the home front, one could argue about whether the Fed's various
easing measures have had any impact. But no one can doubt that they
stand ready to 'do more' going forward. Wednesday's extension of
Operation Twist was considered underwhelming by some in the market,
but the bigger news was the extent of the downgrade to the Fed's
GDP growth outlook. Bernanke went to great lengths in his press
conference to reiterate that they are not out of options and that
they will do more should there be a need. But the market seems to
realize that the Fed may not be able to do anything else this year,
given the November elections and the timeline for Operation Twist
In corporate news,
) came out with better than expected results when one-off pension
accounting related charges are excluded.
) posted better than expected results, but guided lower.
) missed expectations.
Director of Research