Thursday, August 2, 2012

Update ...

Today, although headline economic indicators appeared mixed, we believe they were disappointing.  However, no sign of love came from the Fed's Bernanke or ECB's Draghi as they both basically said all options remain on the table but did not provide specifics as to when new monetary easing policies may be launched.  Many remain hopeful that tomorrow's NFP will disappoint enough to force Bernanke to provide clearer indication of a QE3 later this month.

The market is showing disappointment in the Fed and the ECB as it remains in the red for the day.  S&P 500 is down 1.3%.  Again, surprisingly, VIX is up only 1%.  Lack of indication of volatility in the future could mean that the market is assuming that no action on the part of Bernanke could be an indication of a better than expected NFP tomorrow.

Last week's initial jobless claims of 365K were 5K below consensus.  However, the prior week's numbers were revised up again, by 7K.  We believe this slight 'miss' which is positive for the jobs market is mainly due to some early hiring of temps, which we believe will likely be let go by end of summer.  Companies continue to hesitate in hiring full time employees.  For this reason, temp hiring may move up again for a couple of weeks in Sept., but will ease back until later into Christmas season.  The 4-week moving average dipped slightly by 2,750.

June factory orders went down 0.5% from May, much worse than the +0.5% consensus.  Although the June numbers are basically considered old news, a few things in today's published report stood out.  Without orders for transportation equipment, factory orders fell 1.8% in June! Without the ever necessary defense equipment, orders fell by 1.5%.  Orders for computers and electronics products (excl. semiconductor equipment) fell by 4.4%.  Orders for household appliances fell by 3.5%.  Some small bright spots in the report included a 1.3% increase in orders within durable goods industries (excl. the semiconductor space).  We note this increase was lower than the April to May change of +1.5%.  Orders for construction machinery also went up a bit.

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