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    By Carlos Guillen

    Despite some rather positive economic data points, which suggest economic activity is still improving, investors have continued to sell as many could not refrain from following the herds.

    Perhaps not so encouraging for those who are expecting no tapering in the short run was news of increasing prices from a producer's perspective. According to the Department of Labor, the Producer Price Index (PPI) in March increased month-over-month by 0.5 percent; this compares with the Street's consensus estimate calling for a 0.1 percent rise. Because retailers try to pass costs on to consumers as soon as possible, the PPI can provide hints on future trends for the CPI, which overall has held pretty stable at a rate of 1.56 percent on a year-over-year basis as of February. The rather surprising increase in PPI was mostly as a result of services costs climbing by the most in four years while commodities stagnated. Excluding food and energy contributions to the price index, core PPI increased month-over-month by 0.6 percent, while economists' average forecast called for a 0.1 percent rise. These recent increases in prices are also likely to make the Fed flinch, taking away some of the inclination to remain "accommodative" as the most recent FOMC minutes suggested this past Wednesday. Nonetheless, despite the increase in cost for producers, it is difficult to see these costs going higher as there is little evidence of rising demand world-wide, which we believe will leave the Federal Reserve enabled to maintain its course on their current policy.

    Clearly the most encouraging economic data out today was that consumer sentiment not only landed higher than expected but also reversed its negative direction from last month. The University of Michigan's Consumer Sentiment April result landed at 82.6, higher than the Street's expectation of 81.0, increasing from the 80.0 reached in March, and reaching the highest level since July of last year when it was 85.1. Given the close relation between consumer sentiment and consumer spending, this reversal in sentiment may fuel hopes that consumption may continue its uptrend. As it stands, according to the most recent government data, personal consumption expenditures increased quarter-over-quarter by 3.3 percent in the December quarter, which ramped higher from 2.0 percent in the prior quarter. Putting the icing on the cake, the index of expectations six-months from now, which more closely projects the direction of consumer spending, rose to 73.3 in April from 70.0 the month before, beating economists' forecast of 71.4.

    In all, it is apparent that investors are jittery; however, we cannot say they are panicking as overall volumes are not significant enough to prove this. On a lighter note, given that volumes are not suggesting downside conviction, the losses posted this week could easily reverse next week. For certain, next week's trading session promises to be a very eventful one as a host of economic data will be on display, including retail sales, CPI, manufacturing, and housing data; as well as more 1Q earnings.

    Apr 11 2:06 PM | Link | Comment!

    By Carlos Guillen

    After a very robust trading session yesterday, which had the Dow Jones Industrial Average gaining over 180 points after the release of the Federal Open Market Committee (FOMC) minutes that helped to clear the notion that interest rates were increasing sooner rather than later, today stocks are trading lower as news that Chinese exports and imports landed worse than expected. And the fact that initial claims data was better than expected has not been able to provide any lift for markets.

    Clearly encouraging today was data that showed the number of people filing for unemployment benefits for the first time continued to decline, reaching the lowest level in close to seven years. According to the Department of Labor, initial claims during the week ended April 5 totaled 300,000, decreasing from the 332,000 revised figure reported for the prior week and landing below the Street's estimate of 325,000. This level of initial claims has not been seen since the week of May 12, 2007, about six months before the recession, when it was 297,000. The result continued to be below the 350,000 level, which economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month, so after rather discouraging employment data recently, the hope for an improving jobs market is coming back to life again. The initial claims' four-week moving average was 316,250, decreasing from the prior week's average of 321,000, so it is becoming apparent that the down trend is still on track and that there has been pent demand for hiring which did not take place as a result of the harsh winter weather. This is a good indication that the economy may grow better than expected. However, from a short-term trader's perspective this may not be so encouraging as the Fed is monitoring progress in the labor market and on the improving economic backdrop in order to continue scaling back its bond-buying program.

    Perhaps serving to spook investor today was some unexpectedly weak trade data for March out of China, which reported an 11.3 percent decline in imports and a 6.6 percent decline in exports. The decline in exports was partly attributed to distortions of inflated data in early 2013. The reduced imports level was in part the result of falling commodity prices. As it stands, investors are increasingly concerned that expansion in the world's second-largest economy will deteriorate further. In order to prevent further deterioration of economic growth, the Chinese government is taking steps including railway spending and tax relief while looking to avoid direct monetary policy tools such as bond buying and cuts in banks' reserve requirements. However, many on the Street are speculating that if these measures fail, Chinese economic officials may have no choice but to enact monetary policy.

    Be that as it may, investors here at home have decided to move with the herds and are now causing the Dow to give up all the gains that were achieved during yesterday's trading session. Tomorrow we will be getting a glimpse of University of Michigan sentiment data, which is a leading economic indicator and tends to drive markets. Hopefully this will help attenuate the losses posted so far this week.

    Historically Good Jobless Claims
    By David Urani

    Jobless claims is one of my favorite economic indicators, as it seems to be reliable over time and also comes to us in a very timely fashion making it a leading indicator. Today's reading is very encouraging. Weekly claims hit a level of 300k, the lowest since 2007. And beyond that, just take a look at jobless claims' historical data (below); we are approaching levels that haven't been lower since the 1970's. Of course, there were simply fewer people in the 1970's which makes today's reading all the more impressive. It also coincides with last week's Challenger, Gray & Christmas layoff report which showed the fewest amount of corporate layoff announcements for any Q1 in the last 19 years.

    Jobless claims also have a surprisingly good correlation with the market. Below I've taken the historical jobless claims data and inversed it to show how lower jobless claims coincide with a higher market (and vice versa). I matched that data with the S&P 500, adjusted logarithmically to show past peaks and troughs better.

    As you can see, the peaks and troughs of both the inverse claims and the S&P tend to match relatively well, especially in the last 20 years. And that's because jobless claims really do tend to track pulse of the economy with accuracy over time. Now we just need to see this level of claims hold, as there does tend to be some volatility week-by-week.

    Apr 10 2:57 PM | Link | Comment!
  • A LOOK AT JOLTS - By WSS Research Desk

    By Carlos Guillen

    Taking a look at the Job Openings and Labor Turnover Summary, or JOLTS report, we can see more jobs available in our economy during February. The highlight of the report was that the number of available jobs in the U.S. ticked up, providing some evidence that the jobs situation may improve moving forward as companies are likely to be putting up additional openings in the face of slow but consistent global economic growth. The number of job openings in February was 4.17 million, up from 3.87 million in January, representing a 7.72 percent increase. At the moment the number of job openings still remains well below the 4.32 million openings when the recession began in December 2007; however, the number of job openings has increased 94.5 percent since the end of the recession in June 2009. Among the largest contributors to job openings in September were in retail trade and in professional and business services.

    Hiring increased by 71,000 to 4.59 million, representing a 1.57 percent up tick, and firings declined to 1.62 million from the 1.70 million posted in January, representing a 4.93 percent drop. This data comes after Friday's rather discouraging jobs number that showed a flat unemployment rate of 6.7 percent and an increase in nonfarm jobs of 192,000 in March, both worse than expectation.

    It is also worth looking at the number of unemployed per jobs available, which has been on a down trend since the third quarter of 2009. While most recently this ratio has been holding fairly flat, showing very little room for improvement, it now improved a bit. So we now have a scenario of less layoffs and more hiring going on, certainly an encouraging sign.

    Tags: Job Data
    Apr 08 3:30 PM | Link | Comment!
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