Wall Street Worries

(Stocks in this article: AMEX: SPY, AMEX: DIA, AMEX: SDS, AMEX: DOG, Nasdaq: QQQQ, AMEX: QLD, NYSE: MBI, NYSE: JCP, Nasdaq: RIMM, NYSE: RUK, NYSE: CPS, Nasdaq: MSFT, Nasdaq: YHOO, Nasdaq: GOOG, NYSE: MGM, Paris: GLEZ4.PA)

Today's economic data only offered more reason for Wall Street to worry.

Economic Data & Analysis

Jobless Claims

Weekly initial unemployment claims were reported for the week ended February 16, and while exceeding consensus expectations by only 1,000, the data still offered good reason for concern. First the good news: While recording 349K new benefits claimers this past week, the situation improved from the week before by 9K. The bad news: However, this came on a revised higher prior week count. Claims during the week of February 9 have been adjusted 10K higher to 358K. Even worse news: The four-week moving average increased 10,750, to 360,500 claims filers. It looks safe to say unemployment will move back over 5.0% again soon.

Leading Economic Indicators (Jan.)

Additional unfortunate news reached the market this morning in the form of the fourth consecutive monthly deterioration of the Leading Indicators Index. The measure decreased 0.1% this time around, driven mostly by stock prices and housing permits. The most disconcerting part of this report was found in the fact that the index has fallen 2.0% (4.0% annual pace) over the last six months, marking the largest such drop since early 2001. We do not need to remind you about the poor economic situation that existed that year...

Philadelphia Fed Survey (Feb.)

When it rains, it pours... The consensus was looking for negative 12; January measured negative 20.9. February's Philadelphia Fed Index almost knocked CNBC's Rick Santelli off his feet, as it came in at a negative 24. Indeed, we have seen deterioration in both New York and Philadelphia area manufacturing, and the Midwest looks about ready to join the sad sector. Of course, Detroit is already there and some. What's very unfortunate here is that the Philly Fed found that while manufacturers reported weakness, they also continue to report increases in their input prices, and the prices of the goods they sell as well. So, when people argue that stagflation is not a possibility for 2008, point them toward this report.

The general view, hope, and even our expectation, is that economic softening will impact prices, but if that so-called savior, global economic expansion keeps demand for commodities high, we're in for a rough ride. When prices ease naturally during recession, it allows for some support to counterbalance tough times. Without that support, the depth of recession and its impact can be far worse.

The outlook in such an environment is not good for stocks, and that's certain. The problem, other than the price impact on domestic spending, is that the cost of capital is raised for corporate America; this would offset the impact of Fed rate cuts. So, a good portion of the relief we hope for from Fed action would thus prove illusory. This is why the market is worrying today.

Market-Moving News

• Europe Moves Higher - FT


• EU Adjusts '08 Economic Growth Forecast Lower - Bloomberg


• Asia Rallied Over Night - MarketWatch


• MBIA (NYSE: MBI) Responds to Ackman's Suggestion - CNN Money


• Weekly Initial Unemployment Claims Exceed Views - DOL


• Leading Economic Indicators January


• Philly Fed Survey Grossly Undershoots in Feb.


• Petroleum Status Report


• Crude Eases Off $100 on Profit Taking - Platts


• Pickens Expects Oil, Gas Prices to Fall - CNBC


• Japanese Trade Deficit Widens - CNN Money


• China's Surplus with U.S. Narrows - AP/Yahoo!


• Supreme Court Rules Employees Can Sue 401K Managers - MarketWatch


• Yahoo! Earnings Calendar


• Research in Motion (Nasdaq: RIMM) Raises Subscriber Outlook - CNN Money


• J.C. Penney (NYSE: JCP) Profit Slips 10% - AP/Yahoo!


• Microsoft (Nasdaq: MSFT) Has Announcement, NOT on Yahoo! (Nasdaq: YHOO) - CNBC


• Reed Elsevier (NYSE: RUK) Buys ChoicePoint (NYSE: CPS) - AP/Yahoo!


• Google (Nasdaq: GOOG) to Store Patient Health Records - CNBC


• MGM Mirage (NYSE: MGM) Profit Rises - AP/Yahoo!


• Recession Stocks - Forbes


• Obama Friendly ETFs - SeekingAlpha


• SocGen (Paris: GLEZ4.PA) Turns Page - Forbes


• McCain Denies Inappropriate Lobbyist Activities - CNN


• Navy Successfully Takes Out Satellite - USA Today


• Greek's Week Ahead - Bond Insurers' 11th Hour


• Iran Daily: Tales from the Dark Side

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