By Carlos Guillen
Investors appear to be trying to find direction during today's trading session as there is little in terms of significant economic data to convince them to get into equities. Stocks as reflected by the Dow Jones Industrial Average made a strong start at the opening bell, and trading looked promising for the first six minutes of the session, but then the Dow took a turn for the worse, which was difficult to justify, only to recover losses later in the session and trading up over fifty points.
Perhaps a bit encouraging today was that data showed the number of people filing for unemployment benefits ticked higher but still remained near five-year low levels. According to the Department of Labor, initial claims during the week ended August 3 totaled 333,000, increasing from the 328,000 revised figure reported for the prior week and landing below the Street's estimate of 340,000. The result still remained below the 350,000 level, which economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month. The initial claims' four-week moving average was 335,500, decreasing from the prior week's average of 341,750. Despite the fact that during July there tends to be quite a bit of noise as a result of the Independence Day holiday and auto factories shutting down for maintenance, the trend has been rather favorable, but this may not be all that good for stocks in the immediate term as it may be indicative that the Fed may indeed start tapering sooner rather than later.
Earlier today, sales data from key retailers was good but not good enough to inspire investors. Same store sales, or sales at stores open at least a year, of 10 of the 11 major retail chains that provide monthly sales data rose 4.2 percent, just slightly below the 4.4 percent that the Street had expected. July sales were positively impacted by the start of back-to-school season shopping, while it was hurt by the challenging retail environment that saw mall traffic and the pace of consumer spending slowing. One particular stand out was Limited Brands, the operator of Victoria's Secret and Bath & Body Works chains, which reported that July comparable store sales rose 3 percent, reflecting positive sales across its three brands, which topped Street expectations for a 1.5 percent increase.
In all, trading activity still remains rather volatile, and despite recovering losses posted earlier in the session, it would not be surprising to finish the session rather flat.
Nikkei Not Okay
By David Urani
So, new Japanese Prime Minister Abe made a splash earlier this year with his all-out Keynesian approach to economics through government spending and Federal Reserve overdrive, along with his sidekick Haruhiko Kuroda of the BOJ. It's had the Japanese markets going up and down but for the most part Abe's spending, or promise of, successfully boosted the market from under 1,100 to begin the year, to more than 1,500 in May. But all that spending and money defacing, while giving assets almost no choice but to go up, comes with a cost of course and investors have become wary of that in the months since.
A big part of the caution is over government bonds. There have been signs of severe volatility in Japanese government debt as deficit-fueled spending of course calls into question the reliability of those investments. Likewise, it's perhaps lucky for everyone that the Bank of Japan is buying them up while the private market seemingly shuns them.
Today Mr. Kuroda was out discussing the current policy view and it brings about more questions. For one, the Bank of Japan is keeping current policy steady rather than adding anymore. But in a key point, Mr. Kuroda was also out championing tax hikes which have recently become a big political issue. Obviously the government is out there hell-bent on sparking real recovery in the stagnant Japanese economy so tax hikes certainly aren't a desirable course of action.
Yet, Kuroda says it's in their best interest because of the debt being piled up by the government, and as the head of the BOJ this is coming from the horse's mouth so to speak. Likewise, he essentially called those traders dumping Japanese debt justified.
These comments, along with the BOJ's inaction, suggest Japan may have already used up all the fuel for their pedal-to-the-metal spending approach.
The Nikkei is down approximately 5% this week: