By Carlos Guillen
Equity investors are profit taking at the moment as mixed economic data fails to inspire further impetus for buying more stocks.
Initial Claims data posted earlier today was a clear disappointment, as the result was much worse than expected, making a sharp reversal from the improvements made in the last couple of weeks. According to the Department of Labor, initial claims during the week ended January 26 totaled 368,000, increasing from the 330,000 revised figure reported for the prior week and landing above the Street's estimate of 345,000. The swings in jobless claims may be reflecting challenges the agency has adjusting the data during the holiday period and at the start of quarters. According to the Labor Department, claims trends this month are typical of this volatility. The initial claims' four-week moving average was 352,000, increasing from the prior week's average of 351,750.
Perhaps serving to counter the perception of slowing U.S. economic growth, data from ISM-Chicago showed that the region was expanding at a faster rate than expected. January Chicago PMI increased to 55.6 from the 50.0 level reached in the prior month (revised up from 48.9), landing above the Street's consensus of 50.5. It should be noted that levels above 50 signify growth, so the result means that the region's manufacturing industry is now into two months of expansion. So far, overall economic indicators have been rather mixed; a broader economic measure of manufacturing comes out tomorrow, and this should shed more light on the degree of growth in the U.S. economy.
Adding to the bits of positive economic data today was that income rose above expectations, and consumer spending climbed as incomes grew by the most in eight years, a sign the biggest part of the economy was contributing to the expansion as 2012 came to a close. According to the Bureau of Economic Analysis, personal income during December increased month-over-month by 2.6 percent, better than the Street's consensus estimate calling for a 0.7 percent month-over-month rise. Concurrently, personal consumption expenditures (PCE) increased by 0.2 percent, while economists' average forecast called for a 0.3 percent rise. As result of incomes growing faster than expenditures, the savings rate increased to 6.5 percent from 4.1 percent in the prior month, the highest rate since May 2009.
Despite positive results from Chicago PMI and income-spending data, markets are experiencing a down day as reflected by the Dow Jones Industrial Average, which has lost over 15 points. As we have been observing all along, the economic fundamentals have been mixed and are not quite supporting the current market levels; as such, it would not be a surprise to see this negative downtrend continuing in the short term.