Weak Jobless Claims - Analyst Blog
June 23 2011 - 5:10AM
Zacks
Stocks will likely continue to reflect what Fed Chair Bernanke
said, or didn't say, on Wednesday even as we got another negative
labor market report this morning. The weak growth picture emerging
out of the Fed chief's news conference and today's Jobless Claims
report will likely force stocks to give back the gains of the last
few days.
I discuss the disconcerting aspect of what the Fed chief said
Wednesday below, but let's look at this morning's weaker than
expected labor market report first.
Jobless Claims increased 9 thousand to 429 thousand, while the
four-week average remained unchanged at 426 thousand. This is the
11th week running that the jobless claims number has remained above
the 400 thousand level. Today's number is a reversal of last week's
report and takes us back to the negative upward trend that we have
been consistently seeing since early April. This does not bode well
for the June non-farm payroll report coming early next month.
With respect to the Fed, it delivered as expected on most issues.
It left interest rates unchanged, announced the end of QE2, and
reiterated a positive economic outlook for the second half of the
year. Importantly, the Fed did not tip its hand on another round of
monetary stimulus.
But one negative thing stood out for me in the Fed chief's news
conference and this pertained to the causes of the ongoing weakness
in the economy. Everybody, including the Fed, expects the weakness
to be temporary and restricted to the first half of the year, with
'normal' growth resuming in the second half of the year. The
consensus narrative assigns the blame for the weakness to factors
such as Japan, high fuel costs, and inclement weather.
On Wednesday, the Fed chief came across as tentative and uncertain
in explaining the causes of the softness. Granted, he did mention
the above referred factors (Japan/Fuel), but stated that they were
'partly' to blame. Here is a direct quote of what Bernanke said on
Wednesday, as reported by the Wall Street Journal:
"We don't have a precise read on why this slower pace of growth
is persisting...Maybe some of the headwinds that had been
concerning us, like weakness in the financial sector, problems in
the housing sector, balance sheet and deleveraging issues, some of
these headwinds may be strong or more persistent than we had
thought."
This is a far less benign take on the ongoing economic weakness
than a few transitory factors holding us back. if the causes of the
slowdown are more structural and enduring, then we may have to
recalibrate our growth outlook for the rest of the year.
Aside from Fed watch and the labor market report, we also have a
few earnings reports this morning.
ConAgra (CAG)
modestly missed on earnings, but beat on revenues.
Rite
Aid (RAD) beat both earnings and revenue expectations,
while homebuilder
Lennar (LEN) came ahead of
expectations.
Oracle (ORCL) reports after the
close today.
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