By Carlos Guillen
Equity markets are making an amazing move to the upside during today's trading session after Washington now looks on track to reach an agreement ... at least for the short term, overshadowing the negative effects from a worse than expected spike in initial claims data.
The day began with a rather negative note after a small snapshot of a labor component took the Street by surprise. While the Street had been concerned about the government shutdown creating sharp reversal to the positive trend seen in the last three months, the result was absurd. According to the Department of Labor, initial claims during the week ended October 5 totaled 374,000, increasing from the 308,000 revised figure reported for the prior week and landing above the Street's estimate of 318,000. After twelfth consecutive week of remaining below the 350,000 level that economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month, this week's jump in initial claims was a very disappointing surprise and a negative indication for the employment backdrop. The initial claims' four-week moving average was 325,000, increasing from the prior week's average of 305,000, and we expect this to continue to move higher in the short term.
Also earlier, Treasury Secretary Jacob Lew reiterated in his testimony to the Senate Finance Committee that the deadline to raise the debt ceiling was October 17, and warned of dire consequences if the nation's borrowing limit wasn't raised in time.
Clearly saving equity markets, however, was the House GOP leaders' new proposal to hike the debt ceiling. As it stands, the GOP's proposal raises the borrowing limit for six weeks, and it does not include any policy conditions. This news send stocks soaring today, and it represent amazing move that will serve to end the government shutdown that has been in effect for almost the last two weeks. We should note that the ball now rests on the White House, let's sit tight to see what happens.
In all, it is a great day for stocks as the Dow Jones Industrial Average is bouncing off support by over 230 points. And if tomorrow Wells Fargo and JPMorgan deliver great results, we should be seeing more upside to the Dow.