April 21st, 2011 2:04 PM by Lehel S.
A little better start today in the rate markets while the stock indexes early were pointing to another better open at 9:30. More earnings reports late yesterday coming better than expected. At 8:30 weekly jobless claims were widely expected to have declined 22K after increasing 27K the prior week; claims were down 13K to 403K, continuing claims declined to 3.695 mil frm 3.702 mil the week before. The 4 wk average on claims at 399K frm 396.7K. Claims remain elevated showing little progress recently after falling in Feb and Jan. A week ago the NFIB reported small business optimism, after improving since last Oct, fell to the level prior to last Oct; small businesses are the engine for employment, without hiring in that sector unemployment is unlikely to decline much.
Most Q1 earnings reports are hitting better than expected, driving the equity markets higher but having little if any impact in the employment sector. No job growth, no improvement in the housing sector, $4.00+ gas prices, food prices increasing----it doesn't matter as long as investors large and small see their net worth increase. The US approaching bankruptcy with the political outlook less than favorable that a serious budget reduction plan will emerge----who cares? S&P lowering US debt to negative from stable has generally been pushed to the background and dismissed; the consensus among traders, investors, politicians, analysts and economists is still denial, the US will never lose its AAA credit rating. After all this is the strongest economy and nation in the world-----or is it? Republicans don't want to increase taxes, Democrats don't want to cut spending; if both parties don't get close to being on the same page soon we will wake on day with interest rates much higher, the dollar (already falling hard) will not be the reserve currency of the world and the US will be a follower and not a leader. Hard to imagine, but we are closer than most think and many won't admit outwardly.
At 9:30 the DJIA opened +16, 10 yr note +3/32 and mortgage prices +2/32 (.06 bp).
At 10:00 April Philly Fed business index, expected to have declined to 32.9 frm 43.4, as reported the index plunged to 18.5; the new orders component 18.8 frm 40.3, employment 12.3 frm 18.2 and prices pd for materials at 57.1 frm 63.8. The decline in the index took the stock market down initially and boosted prices in the rate markets. The decline in the overall index supports the growing concern that the economy isn't as strong as had been thought as recently as two weeks ago. (any index read over zeros is considered expansion)
March leading economic indicators at 10:00 expected +0.2% jumped 0.4%.
The FHFA housing price index for Feb declined 1.6%, no surprise there.
This is the end of the week with market closed tomorrow. Next week Treasury will auction an estimated $99B of notes and the FOMC meeting on Wednesday. For the first time the Fed will release its policy statement at 12:30 then at 2:15 Fed chief will hold a news conference allowing questions and opening more details about the meeting and the intent of the generally short policy statement. Given recent events and debates and posturing over the coming budget battle the Fed will have the opportunity to say its piece in a manner unlike we haven't had prior to this meeting. The auctions and the FOMC meeting may keep markets steady at present levels.