Economic News Review 09-23-10

The stock market is seesawing today on mixed data that matched premarket doldrums against early morning enthusiasm. However, the efficient market has reviewed the economic news and found little to raise its hopes. Thus, shares are drifting lower as we publish. This economic news review covers the Weekly Jobless Claims data, Existing Home Sales, Leading Economic Indicators and more.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Economic News Review

Apathy seems to best describe the process of getting used to the pathetic weekly claims data. Week after week, miserable result after tragic end, the depression is wearing on us. We have gotten used to it, and it is a sad, sad thing. While popular media seems perked up on the day's flow of data, the wiser stock market and a few insightful economists see things differently. The day's economic news review here covers Weekly Jobless Claims, Leading Economic Indicators, Existing Home Sales and Natural Gas Inventory.

Weekly Jobless Claims

Weekly Jobless Claims posted yet another plus 400K result this week, and ho hum, nobody cares. We've gotten used to it you see, and so the data for the period ended September 18 barely shook the market. New unemployment insurance benefit filers amounted to 465K this time around, and that is up 12,000 from the revised prior week count. The four-week moving average continues to precisely paint the doldrums of labor, barely nudging down 3,250, to 463,250. Insured unemployment slipped a tenth of a point, to 3.5%, but that likely had less to do with anything but people dropping out of the labor force. We aim to have more to say on claims later today.

Leading Economic Indicators

Leading Economic Indicators rose more robustly than expected in August, lending support to the morning market. LEI increased 0.3% in August, higher than the 0.1% gain economists had forecast. Furthermore, the latest gain followed up on July's 0.1% rise and June's 0.2% back-step. On the surface of the report, the data seems to say a positive change is taking place and that consideration of the data in absolution is not particularly threatening.

However, observation of the long-term index chart reveals an LEI Index that has been on the rise since about six months before the recession ended. What bothers many is that it seems to be topping out now, which from my perspective, raises concern. It is as if it is running out of steam, and could come crashing down like an aircraft that loses its forward thrust.

Looking more closely at the data reveals the Coincident Index was unchanged and the Lagging Index improved 0.2%. What has troubled us since the beginning of the improvement in the Leading Index, is that there are few natural drivers present. Instead, government stimulus measures have continued to play the most important role in the LEI's improvement. Again in August, the important factors behind the gain included interest rate spreads and money supply.

Well, guess what, the Federal Reserve is about impotent now, and the Federal Government is out of resources and has begun cutting back on housing and tax incentives. So, without these drivers, then what is to sustain the LEI? We intend to follow this up with more a more detailed article.

Existing Home Sales

Sales of used homes proved the real swing factor this morning, but that is a sad statement about the general wisdom of our media and investment community, because the news really was not that good.

The National Association of Realtors reported this morning that August sales of existing homes increased 7.6%, to an annual rate of 4.13 million. Sales exceeded economists' consensus expectations for a rate of 4.05 million. Sounds good right? Wrong.

This month's growth came against a severely soft July mark that followed the conclusion of the First-Time Homebuyers Tax Credit. On an absolute basis, rather than the relative metric reported, the pace of sales is downright depressing, down 19% from August of 2009. I remind readers that last year's period was not a robust one for activity, especially when excluding the tax incentive impact.

EIA Natural Gas Report

The EIA reported on Natural Gas this morning. For the week ending September 23, natural gas storage increased by 73 Bcf. Stocks were 175 Bcf less than last year at this time, but 195 Bcf above the 5-year average of 3,145 Bcf. The high relative level of natural gas is symptomatic of solid domestic reserves and burgeoning new sources, and a relatively light level of economic activity and thus demand. In other energy news, Petrobras (NYSE: PZE) prices a $75 billion stock offering.

DC Doings

With the President's economic team under fire, Paul Volcker, the Chair of the President's Economic Recovery Advisory Board, addresses the two-day International Banking Conference sponsored by the Chicago Federal Reserve Bank and the IMF at 1 PM ET. The Federal Communications Commission is opening up the airwaves, which is seen as a positive support underneath technology companies. Unused television stations are expected to be swept up. Goldman Sachs' conference (see below) seems well placed, as usual.

Markets are closed in Hong Kong, Japan, South Korea, Israel and Saudi Arabia today.

Corporate News Drivers

Blackstone Group (NYSE: BX), Adecco and Edwards Lifesciences (NYSE: EW) meet with analysts today. Kimco Realty (NYSE: KIM) hosts its investor day. Jones Soda (Nasdaq: JSDA) has its shareholders meeting.

AECOM (NYSE: ACM) and DigitalGlobe (NYSE: DGI), Waste Management (NYSE: WM), URS (NYSE: URS), Babcock & Wilcox (NYSE: BWC), Education Management (Nasdaq: EDMC), ITT Educational Services (NYSE: ESI), Envestnet (NYSE: ENV), IHS (NYSE: IHS), Orbitz Worldwide (NYSE: OWW) present at the Morgan Stanley (NYSE: MS) Business and Education Services Conference.

The Goldman Sachs Communacopia XIX Conference includes presentations from Verizon (NYSE: VZ), Time Warner (NYSE: TWX), Leap Wireless (Nasdaq: LEAP), Interpublic Group (NYSE: IPG), Liberty Media (OTC: LINTA.OB), Moody's (NYSE: MCO), Savvis (Nasdaq: SVVS), DirectTV (NYSE: DTV), Discovery Communications (OTC: DISCA.OB), Rackspace Hosting (NYSE: RAX), Level 3 Communications (Nasdaq: LVLT), Viacom (NYSE: VIA).

The EPS schedule includes news from Cano Petroleum (AMEX: CFW), Comtech (Nasdaq: CMTL), Corgenix Medical (Nasdaq: CONX), Finish Line (Nasdaq: FINL), General Finance (Nasdaq: GFN), Neogen (Nasdaq: NEOG), Nike (NYSE: NKE), Park Electrochemical (NYSE: PKE), Qualstar (Nasdaq: QBAK), Rite Aid (NYSE: RAD), Saba Software (Nasdaq: SABA), Scholastic (Nasdaq: SCHL), Spectrum Control (Nasdaq: SPEC), Texas Industries (NYSE: TXI), TIBCO Software (Nasdaq: TIBX), and Vail Resorts (NYSE: MTN).



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