GDP & Jobless Claims Disappoint - Analyst Blog
May 26 2011 - 5:15AM
Zacks
Today's negative economic reports will add to the growth concerns
that have been weighing on stocks and commodities in recent
days.
Contrary to expectations, the first quarter GDP growth number was
left unchanged, indicating that the economy's growth pace had
stalled. And Jobless Claims again reversed their downward trend of
the last two weeks, raising doubts about the sustainability of the
labor market recovery.
In a surprise report, the Commerce Department left the initial read
for the first-quarter GDP growth rate unchanged at 1.8%. The
expectation was for the growth rate to go above the 2% rate, with
some estimates as high as 2.5%.
The internals of the GDP report were equally unsettling, with
nothing positive that could reassure us on the growth front.
Granted this is a backward-looking report. But it nevertheless adds
to concerns that the economy had far less momentum going into the
second quarter than was earlier believed. I would expect GDP growth
estimates for the current quarter to start trending down in the
coming weeks. We had seen some early signs of that trend in recent
days already, with a couple of major brokerage houses cutting their
estimates.
In another negative surprise for the market, weekly Jobless Claims
jumped 10 thousand for the week to 424 thousand. The four-week
average dropped by 1750 to 438.5 thousand.
Claims had spiked last month above the important 400 thousand level
after consistently coming down to the under-400 thousand level
earlier in the year. A number of non-fundamental reasons were given
for the upswing, ranging from issues related to the start of a new
quarter to the Good Friday holiday and emergency benefits in
Oregon. The jump today, after the drop over the last few weeks,
puts a question mark on those explanations.
Claims under the 400 thousand level are generally associated with
steady job gains in the economy. For the economic recovery to move
on to a sustainable trajectory and for the current ongoing growth
jitters to subside, we need claims to fall, and stay, below the 400
thousand level in the coming weeks.
The earnings calendar is almost over, but we did have a few major
earnings reports this morning.
Big Lots (BIG), the
close-out retailer, modestly beat EPS expectations, met revenue
expectations, but guided lower. Ketchup maker
Heinz (HNZ) missed EPS expectations by a penny,
came inline with revenue expectations, and raised its dividend.
Tiffany (TIF), the high-end jeweler, handily beat
EPS and revenue expectations and raised its outlook.
NetApp (NTAP), the data storage firm, also came
ahead of earnings and revenue expectations and guided higher.
Today's GDP and labor market reports add to the growing list of
indicators that appear to be telling us that the economy's soft
patch in the preceding quarter has carried into the current one.
This is a significantly weaker view of the economy that what the
market was expecting.
BIG LOTS INC (BIG): Free Stock Analysis Report
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
NETAPP INC (NTAP): Free Stock Analysis Report
TIFFANY & CO (TIF): Free Stock Analysis Report
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