Equity markets are trading higher despite rather mixed economic results; however, light volumes can cause things to change fairly quickly.
Perhaps a bit positive this morning was that jobs data for the week landed a bit better than expected. According to the Department of Labor, initial claims during the week ended November 17 totaled 410,000, decreasing from the 451,000 revised figure reported for the prior week and landing below the Street's estimate of 423,000. It should be noted that last week's astronomical climb in initial claims was actually even worse than originally reported, as last week's result was revised higher from 439,000. The initial claims' four-week moving average was 396,250, increasing from the prior week's average of 386,750. It is evident that the storm that we experienced a few of weeks ago is still having an adverse effect on employment, leaving many out of work.
One disappointing item today was that consumer sentiment was worse than expected. The University of Michigan Consumer Sentiment November final result landed at 82.7, which was lower than the Street's expectation of 84.5 and lower than the initial estimate of 84.9. The result did slightly increase from the 82.6 level reached in October and represented the highest reading since September 2007. Despite the fact that the index of consumer sentiment made negligible gains this month, overall confidence is still very encouraging; however, consumers are increasingly worried about the upcoming fiscal cliff dilemma, which is the main reason for the decreasing gains in sentiment. Quite surprisingly, consumers are finding their current financial positions to be improving, as an increasing number of households reported more favorable financial positions, the highest since March of 2008. Then again, a bit more than half of consumers saw their finances decline. For perspective, a year ago, close to two-thirds reported worsening financial positions. At the moment, the rather high level of confidence is dependent on the promise of no higher taxes, except on the wealthy.
Also disappointing was that consumers' outlook for employment, the economy, and their personal finances declined this month. The expectations index decreased to 77.6 from 79.0, landing a lower than the prior estimate of 80.8. Interestingly, consumers see a significant improvement in the jobs market during the year ahead, as this month consumers express the most favorable outlook for the unemployment rate since 1984.
Another report showed that the indexes of leading indicators improved last month, continuing to show that the U.S. economy will modestly expand in the near term. The Conference Board announced that its index of Leading Economic Indicators increased month-to-month by 0.2% in October, landing in-line with the Street's consensus estimate. Perhaps a bit discouraging was that there were less positive components than there were in the prior month. Of the ten components that make up the leading indicator, 4 were positive compared to 6 positive components in September. Nonetheless the index has been rising for two consecutive months, and its trailing six-month growth rate also increased from 0.2% in September to 0.5% in October. In essence, the data is still signaling that the economy will likely continue to slowly expand through this year and into the first quarter of 2013.
Peace In The Middle East (At Least A Ceasefire)
This afternoon, it seems that the latest skirmish has come to an end. Egypt has been working hard to end the conflict and find a way to save face with its more radical constituents, the Palestinians, and also Israel. Egyptian Prime Minister Hesham Kandil had a difficult line to walk. If he appeared too radical and siding too much with the Palestinians then all the aid Egypt receives will go up in smoke. Egypt is fifth on the list of countries that receive U.S. foreign aid (second in terms of military aid) at $1.6 billion per year. That is not chump change.
Oil prices spiked this morning following the bus bombing in Tel Aviv, but have fallen back since the rumors of the ceasefire began to circulate. Then, Reuters tweeted that Egypt will announce the ceasefire today at 9 PM (2 PM Eastern). Apparently, the naval blockade of Gaza will remain. It will be interesting to see if Egypt steps up its plans to cut down on the missile shipments into Gaza after the past week's fighting. The missiles and rockets that are being fired into Israel are smuggled into the Gaza Strip through Egypt's Sinai Peninsula.