Economic Reports & Financial Markets Summary

By Markos N. Kaminis - Economy & Markets:

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

Thursday offers a busy day for economic, corporate and international news. The ECB, BOE and South African central bank announced monetary policy decisions. Four economic reports reached the wire and retailers reported chain store sales for the month of January.

(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK)

Economic Reports

Weekly Initial Jobless Claims

Weekly jobless claims rocketed higher in the week ended January 31st, rising to 626K. This compared against the prior week measurement of 591K (revised) and surpassed consensus expectations for 583K. The four-week moving average climbed 39,000 to 582,250, which is most disturbing.

Today's news came as no surprise to investors who have been following the regular layoff announcements across American industry. Furthermore, the entirety of the employment reports published over the last two days indicate deep distress might be illustrated by the government's monthly Employment Status Report on Friday. Economists forecast the report will show unemployment rose to 7.5% in January, from 7.2% in December.

Yesterday, Challenger, Gray & Christmas reported planned corporate layoffs measured 241,749 in January, which was up from December's 166,348. ADP, which produces a useful forecaster of the federal employment report, noted private nonfarm payrolls (excluding government jobs) decreased by a net 522K in January, versus 693K in December. In this especially difficult time period before the latest fiscal stimulus plan becomes law, government job losses seem likely to take the federal report above the ADP data. States and municipalities are currently laying off or contemplating layoffs of municipal workers as they manage their "doomsday budgets," as New York City puts it. However, there is hope that Obama's spend-heavy, state conscious plan will provide some support to municipalities in the months ahead.

Monster Employment Index

The Monster Worldwide (NYSE: MWW) Employment Index measures online job demand. The web has overtaken print advertising, especially in the job market. For this reason, as employment has deteriorated, the Monster measure maintained an offsetting support driven by market share gains over print. Even so, it still drifted lower. However, at some point, when a cataclysmic typhoon hits, all ships sink. Monster noted its index fell to 118 in January, down 13 points from December's measure of 131.

Productivity & Costs

Productivity and Costs for the fourth quarter improved on both ends. The reason for this is of course due to plant closings, consolidation and workforce rationalization. This is a testament to American industry and its capability to adapt to a changing marketplace. It should result in more companies staying solvent than would have been the case twenty years ago. Even so, jobs are still being lost, and that weighs on consumer spending and increases the number of Americans living in poverty.

Productivity improved 3.2%, versus consensus expectations for a 1.1% rise. Unit Labor Costs rose by 1.8%, versus consensus expectations for a 2.9% increase. Both figures were also better than the third quarter, if "better" ignores job loss and income reduction.

Factory Orders

Factory Orders provided a clear message of economic contraction, if not despair. This measure is pure, and reflects real demand for goods. Unlike the previous report, the message cannot be misunderstood. Orders dropped off a cliff in December, moving lower by 3.9%, as compared to expectations for a 3.0% decline. The drop matched against a 4.6% dive in November.

If this figure continues to decline, at some point companies may not be able to maintain Productivity and Labor Cost gains, or to put it simply, to keep up. We related this ability to solvency previously, and so we hope you understand how critical it is for American industry to "keep up" with demand decline. However, there is a death spiral of interrelated factors here. How can one expect improvement when unemployment continues to soar higher. We fear Obama's words from a speech yesterday, where he warned that failure to provide stimulus would lead to tragic consequences, are as true as they are frightening.

International Economic News

Central Bank Rate Moves

The European Central Bank (ECB) kept rates steady today, while the Bank of England cut by another 50 basis points. Jean-Claude Trichet, well aware of a likely negative market reaction to his inaction, stated that it is very possible the ECB will reduce rates by 50 basis points in March. I must comment here on what I see as a mistake. Why would you plan on a cut in a month based on an expected need for one, and not act immediately?

The answer to this question might be tied to the EU's currency interests. The dollar has regained its strength against the euro as Europe has followed America into recession. By holding rates steady, it's possible the EU hoped to strengthen the euro. The problem is that by implying a cut would ensue in March, you signal to all parties the same message a current rate cut would have offered. Thus, I see this as a flawed monetary policy decision and useless meeting, if my presumption is correct. The other possibility is that the ECB really believes its actions to this point might prove adequate. This is a complicated matter worthy of an entire article, and so we may take a closer for you in the days ahead.

The BOE, serving a nation that is in even deeper trouble than broader Europe, took decisive action in lowering its key rate by 50 basis points, to 1.0%. South Africa's central bank also cut rates today by a full point, as the global economy is faltering. Commodity or raw material suppliers like African nations are feeling hard repercussions from declining demand for materials. While lacking the domestic growth seen in India and China, they cannot manage to avoid recession, as the Asian giants are expected to.

Corporate News Drivers

America's retailers reported January Chain Store Sales today (for the most part anyway). Without the incentive of guilt-ridden holiday purchases, retailers were left out in the cold in January. Outside of early markdown inspired sales, weekly ICSC data indicates that consumers are hunkering down big-time now.

Wal-Mart (NYSE: WMT), however, continues to take market share from department stores and mall based retailers alike. This company, whose shares rose in the double-digits last year, is a clear beneficiary of frugal spending. First of all, you save gas money by driving to the one-stop shop. When you get there, you find low priced goods of decent quality, unlike some "dollar store" models, where you get what you pay for. Gained economies of scale have helped Wal-Mart to become the most important buyer for many of its suppliers. This helps it secure low cost inventory, which it then reproduces in market-besting prices, drawing consumers far and wide. Wal-Mart's same-store sales rose 2.1% in January.

The story was much different for most of the retail world. Thomson Reuters tracks sales, and forecast January sales likely fell 1.8% for its grouping of 35 retail chains. The ICSC said sales fell 1.6% in January. Closer inspection shows January individual results:

Costco (Nasdaq: COST): -2.0%
Target (NYSE: TGT): -3.3%
Limited Brands (NYSE: LTD): -9.0%
The Gap (NYSE: GPS): -23%
Nordstrom (NYSE: JWN): -11.4%
Saks (NYSE: SKS): -24%
Macy's (NYSE: M): -4.5%
J.C. Penney (NYSE: JCP): -16.4%
Children's Place (Nasdaq: PLCE): -11%
Hot Topic (Nasdaq: HOTT): +6%
The Buckle (NYSE: BKE): +14.7%

Thursday's EPS Schedule

Emerald Asset Management kicks off its 16th Annual Emerald Groundhog Day Investment Forum in Philadelphia on Thursday, and The Greek will be there. The day's earnings schedule highlights news from Cisco Systems (Nasdaq: CSCO), Alkermes (Nasdaq: ALKS), Avanex (Nasdaq: AVNX), Banco Santander (NYSE: STD), Bebe Stores (Nasdaq: BEBE), Brookfield Properties (NYSE: BPO), Bunge Ltd. (NYSE: BG), Burger King (NYSE: BKC), Carbo Ceramics (NYSE: CRR), Cardinal Health (NYSE: CAH), CardioDynamics (Nasdaq: CDIC), Carlisle Cos. (NYSE: CSL), Cepheid (Nasdaq: CPHD), CIGNA (NYSE: CI), Cincinnati Bell (NYSE: CBB), Cohu (Nasdaq: COHU), Deutsche Bank (NYSE: DB), Diamond Offshore (NYSE: DO), Duke Energy (NYSE: DUK), Eagle Materials (NYSE: EXP), Earthlink (Nasdaq: ELNK), Echelon (Nasdaq: ELON), Elizabeth Arden (Nasdaq: RDEN), EOG Resources (NYSE: EOG), Evergreen Solar (Nasdaq: ESLR), Exide (Nasdaq: XIDE), FEI Co. (Nasdaq: FEIC), Flowers Foods (NYSE: FLO), Gartner (NYSE: IT), GlaxoSmithKline (NYSE: GSK), Hartford Financial (NYSE: HIG), Healthways (Nasdaq: HWAY), IDEX (NYSE: IEX), IMS Health (NYSE: RX), JDSU (Nasdaq: JDSU), Kellogg (NYSE: K), Lennox (NYSE: LI), Mastercard (NYSE: MA), MF Global (NYSE: MF), MICROS Systems (Nasdaq: MCRS), Millipore (NYSE: MIL), Moody's (NYSE: MCO), National Fuel Gas (NYSE: NFG), News Corp. (NYSE: NWS), Penn National Gaming (Nasdaq: PENN), Pitney Bowes (NYSE: PBI), Ralcorp (NYSE: RAH), ResMed (NYSE: RMD), Roper Industries (NYSE: ROP), Seattle Genetics (Nasdaq: SGEN), Sonic Foundry (Nasdaq: SOFO), Sonoco Brands (NYSE: SON), Spectra Energy (NYSE: SE), Tenneco (NYSE: TEN), Terremark Worldwide (Nasdaq: TMRK), Estee' Lauder (NYSE: EL), The Hanover Insurance Group (NYSE: THG), Timberland (NYSE: TBL), Unilever N.V. (NYSE: UN), VeriSign (Nasdaq: VRSN), Watson Wyatt Worldwide (NYSE: WW), Western Union (NYSE: WU) and many more believe it or not.


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