Thursday's Brew - Oct 5
Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful today. The two driving factors of the market early this morning will likely be the U.S. Weekly Jobless Claims data release for the week ended September 30th and news of an OPEC oil production cut. S&P 500 futures and NASDAQ futures were higher in pre-market activity, while Dow futures indicated lower.
Jobless claims were announced this morning at 8:30 a.m., and measured down 17,000 to 302,000, which was better than estimates. A Bloomberg News survey of 38 economists found the median forecast for jobless claims to show a decrease of just 1,000 to 315,000. The weekly average for the year has been 311,000, so today's news should be a positive for the stock market.
Earlier, the Monster Employment Index, a gauge of U.S. online job demand, eased in September. The index dipped to 172 last month from 173 a month earlier, Monster said, but added that this did not mark the start of a downward trend in the labor market. "The major reason for the decline in September was based on two categories, finance and real estate, which we believe are both related to the slowdown in the housing market," said Steve Pogorzelski, group president of Monster Worldwide. However, recent trends have been very positive in the Monster index, which is now showing a year-over-year growth of 32 points, or 23 percent.
In other jobs news, a private survey released on Wednesday by ADP Employer Services showed U.S. private employers added 78,000 jobs in September, well below a Reuters poll's median forecast of 110,000 and an August gain of 107,000. Our take on the jobs picture is that thus far jobs losses, though more industry specific than broad based, pose concern for the economy. We have seen significant loss in auto and housing related markets, and it is noteworthy that these make up a large portion of our economy, and could portend a trickle down effect to consumer spending.
Working against the employment data, likely rising oil prices today could threaten recent stock gains. An OPEC delegate said the producer group will cut output by 1 million barrels per day as soon as possible. This marks the first cut of production since 2004, and shows OPEC's conviction to maintain crude prices above the $60 a barrel mark, which is down from a $78 high in July.
The Fed is not helping things for stock enthusiasts either. The Fed's Vice Chairman Donald Kohn said in a speech late yesterday that he's more worried about persistent inflation than a slowdown in growth. ``Don't sell the Fed's concern about inflation short,'' he said in response to questions after the address. Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. central bank remains worried inflation is too high but is also watching to see how much "a substantial correction" in housing markets will slow economic growth. The key words to note are "watching to see". This would indicate that the Fed is likely to maintain current rate levels, but could move in either direction depending on data. This reinforces our view that markets will trade in a sideways pattern, while investors debate which direction the economy is heading. We expect the words "hard landing" and "soft landing" and "recession" will be over used during the next four months. Until it becomes clear where the economy will settle, the market is unlikely to make any decisive move in either direction, in our view.
If it looks as if the Fed could cut interest rates, but the economy is not in too horrible condition, stocks would then start higher with conviction in our view, and we would overweight early cyclicals. It is probably wise to begin looking at those ideas now, and take some position with a keen eye on earnings results. Early cyclicals will make great investments until they report earnings shortfalls and this needs to be watched carefully. We have seen some of this already in semiconductor warnings. We would take positions in the semiconductor industry following the third quarter's results, and we would review those positions before fourth quarter preannouncement season.
Overseas, European stocks stormed to a five-year peak on Thursday, boosted by gains in the U.S. and Asia. Markets are anticipating rate decisions from central banks in Britain and the euro zone. The European Central Bank is expected to raise interest rates and markets see a hike from the Bank of England coming next month, but growing confidence that the U.S. Federal Reserve has ended more than 2 years of monetary tightening has helped European shares. The Japanese Yen corrected higher against the Euro and dollar, after fear subsided a bit concerning North Korea's warning of a nuclear test.
Several Restaurant and retail chains are set to report same-store sales on Thursday, and Starbucks and Target exceeded results. Chicago Fed President Michael Moskow and Philly Fed Chief Charles Plosser are set to speak today. The day's performance will likely depend on same-store sales, as oil strength and job strength work against each other. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading.
disclosure
Jobless claims were announced this morning at 8:30 a.m., and measured down 17,000 to 302,000, which was better than estimates. A Bloomberg News survey of 38 economists found the median forecast for jobless claims to show a decrease of just 1,000 to 315,000. The weekly average for the year has been 311,000, so today's news should be a positive for the stock market.
Earlier, the Monster Employment Index, a gauge of U.S. online job demand, eased in September. The index dipped to 172 last month from 173 a month earlier, Monster said, but added that this did not mark the start of a downward trend in the labor market. "The major reason for the decline in September was based on two categories, finance and real estate, which we believe are both related to the slowdown in the housing market," said Steve Pogorzelski, group president of Monster Worldwide. However, recent trends have been very positive in the Monster index, which is now showing a year-over-year growth of 32 points, or 23 percent.
In other jobs news, a private survey released on Wednesday by ADP Employer Services showed U.S. private employers added 78,000 jobs in September, well below a Reuters poll's median forecast of 110,000 and an August gain of 107,000. Our take on the jobs picture is that thus far jobs losses, though more industry specific than broad based, pose concern for the economy. We have seen significant loss in auto and housing related markets, and it is noteworthy that these make up a large portion of our economy, and could portend a trickle down effect to consumer spending.
Working against the employment data, likely rising oil prices today could threaten recent stock gains. An OPEC delegate said the producer group will cut output by 1 million barrels per day as soon as possible. This marks the first cut of production since 2004, and shows OPEC's conviction to maintain crude prices above the $60 a barrel mark, which is down from a $78 high in July.
The Fed is not helping things for stock enthusiasts either. The Fed's Vice Chairman Donald Kohn said in a speech late yesterday that he's more worried about persistent inflation than a slowdown in growth. ``Don't sell the Fed's concern about inflation short,'' he said in response to questions after the address. Federal Reserve Chairman Ben Bernanke said on Wednesday the U.S. central bank remains worried inflation is too high but is also watching to see how much "a substantial correction" in housing markets will slow economic growth. The key words to note are "watching to see". This would indicate that the Fed is likely to maintain current rate levels, but could move in either direction depending on data. This reinforces our view that markets will trade in a sideways pattern, while investors debate which direction the economy is heading. We expect the words "hard landing" and "soft landing" and "recession" will be over used during the next four months. Until it becomes clear where the economy will settle, the market is unlikely to make any decisive move in either direction, in our view.
If it looks as if the Fed could cut interest rates, but the economy is not in too horrible condition, stocks would then start higher with conviction in our view, and we would overweight early cyclicals. It is probably wise to begin looking at those ideas now, and take some position with a keen eye on earnings results. Early cyclicals will make great investments until they report earnings shortfalls and this needs to be watched carefully. We have seen some of this already in semiconductor warnings. We would take positions in the semiconductor industry following the third quarter's results, and we would review those positions before fourth quarter preannouncement season.
Overseas, European stocks stormed to a five-year peak on Thursday, boosted by gains in the U.S. and Asia. Markets are anticipating rate decisions from central banks in Britain and the euro zone. The European Central Bank is expected to raise interest rates and markets see a hike from the Bank of England coming next month, but growing confidence that the U.S. Federal Reserve has ended more than 2 years of monetary tightening has helped European shares. The Japanese Yen corrected higher against the Euro and dollar, after fear subsided a bit concerning North Korea's warning of a nuclear test.
Several Restaurant and retail chains are set to report same-store sales on Thursday, and Starbucks and Target exceeded results. Chicago Fed President Michael Moskow and Philly Fed Chief Charles Plosser are set to speak today. The day's performance will likely depend on same-store sales, as oil strength and job strength work against each other. We hope you enjoyed "Today's Morning Coffee" and wish you a good day trading.
disclosure
posted by The Greek | 5:55 AM
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