Again, with the Administration pushing hard for union growth in this country they didn't want to highlight the fact unions were prepared to cripple commerce by trying to extract more from rails during what everyone acknowledges is a serious economic malaise. I would love the bully pulpit to be used to highlight positives rather than always be a perch for finger-pointing and anger. The fact is we should pursue more free trade agreements, which every president has since 1974. Each day the world is sensing it can get by more and more without America. Sure, we are giant consumers and everyone wants to sell us stuff, but sources of capital are finding energy elsewhere. And countries are bypassing America doing business in their own currency.
Today the big news is there isn't any big news to greet investors. In fact, there is something akin to the morning after now that it feels like the collapse in Greece will happen later while bits and pieces of the jobs bill will wind its way through the Vaudevillian system that is Washington. The tone of the market is also taking a cue from the close, which was somewhat disappointing, but proved just how big a deal that 11,600 number is for the Dow. Now, do we brace for a big pullback? I think for now 11,370 becomes a critical downside number.
JP Morgan (NYSE:JPM) posted earnings that beat the Street by $0.11, but the numbers were suspect, including an assumption known as debt valuation adjustment (NYSE:DVA) that added $1.9 billion on the assumption if company bonds were redeemed now. Other data out this morning is largely inconsequential, which is better than disastrous, but not enough for a spark.
The August trade balance was somewhat of a non-event, with our overall trade deficit coming in at $45.6 billion, roughly in line with the consensus estimate of $46.0 billion. The result was essentially unchanged from July, as were imports (+0.0%) and exports (-0.1%). We suppose it could almost be considered a good thing that there was so little change in August, considering all that happened during the month. Demand for exports was down slightly, but not in a way that would signal a crisis. A general takeaway would be that both imports and exports dropped, indicating a slowdown of trade, but the change was minimal.
Infinitesimal Improvement on Jobs
By: Carlos Guillen, Research Analyst
Earlier this morning, according to the Labor Department, initial claims during the week-ended October 8 totaled 404,000, which decreased from the 405,000 revised figure reported for the prior week, and landed lower than the Street's estimate of 406,000. The four-week moving average of insured unemployment for the week-ended October 1 totaled 3.72 million, representing a decrease of 21,250 week to week.
While the initial claims figure showed a small improvement, it appears that the 400,000 mark is still providing strong resistance, and more than likely this level will remain the norm for the rest of this year.
Although last week's jobs numbers were also mildly favorable, one cannot forget that the unemployment rate appears to be stuck at an unacceptable level, and I estimate that the economy needs to add approximately 129,000 jobs per month in order to just satisfy population growth; and more than that to bring the unemployment rate to normal (5%-6%) historic levels.
At the moment, infinitesimal improvements in the labor market could help ease concerns about a new recession; however, much of the economy's fortunes are now depending on how Europe handles its debt crisis.
The market will be slightly down, but I liked yesterday's action in tankers, construction, and retail stocks. There are a lot of different indicators out there, but the message I'm getting from the market is that the worst has been avoided for the moment, though the risks are real.