Reuters
2022.09.22 22:54

LIVE MARKETS-Data through Fed goggles: jobless claims, leading index, current account

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Main U.S. indexes red; Nasdaq off ~1.4%

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Cons disc weakest S&P 500 sector; energy leads gainers

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Euro STOXX 600 index falls ~1.5%

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Dollar, gold dip; crude, bitcoin gain

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U.S. 10-Year Treasury yield surges to ~3.70%

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DATA THROUGH FED GOGGLES: JOBLESS CLAIMS, LEADING INDEX, CURRENT ACCOUNT (1053 EDT/1453 GMT)

Wednesday, Fed watchers got what they were expecting and then some - the baked-in 75 basis point interest rate hike came wrapped in a more hawkish than expected dot plot with a side of gloomy economic projections.

Whether those alarming dots come to fruition largely depends on economic data, three of those indicators graced investors’ screens on Thursday.

The number of U.S. workers filing first-time applications for unemployment benefits (USJOB=ECI) crept higher last week to 213,000, a 2.4% increase.

The Labor Department’s print landed 5,000 short of consensus.

The labor market remains, in a word, tight. Employers are facing difficulties finding qualified personnel, and there are still about two job vacancies for every unemployed worker.

It’s this tightness which has added steel to the Fed’s rate hike resolve, for not only does this state of affairs signal ongoing wage inflation, it also suggests the employment market can withstand a few buckets of cold water dumped on the demand side of the jobs equation.

“While overall economic activity is expected to slow, leading to a mild recession in H1 2023, the low level of claims is a reminder that labor market conditions remain extremely tight,” writes Nancy Vanden Houten, lead economist at Oxford Economics (OE). “The imbalance between the supply and demand for workers is key factor behind the Fed’s plans to continue aggressively raising interest rates.”

Ongoing claims (USJOBN=ECI) , reported on a one-week lag, eased by 1.6% to 1.379 million slipping further below the pre-pandemic 1.7 million level.

Next, economic signals from August suggest economic contraction.

The Conference Board’s (CB) Leading Economic index (LEI)

(USLEAD=ECI) , which aggregates a basket of ten forward-looking indicators, including jobless claims, ISM new orders, core capital goods, building permits and stock prices, to name a few.

The August number came in at -0.1%, marking the LEI’s sixth straight month in negative territory, a potential sign of recession according to Ataman Ozyildirim, CB’s senior director of economics.

“Among the index’s components, only initial unemployment claims and the yield spread contributed positively over the last six months,” notes Ozyildirim, adding that “a major driver of this slowdown has been the Federal Reserve’s rapid tightening of monetary policy to counter inflationary pressures.”

The graphic below pits the LEI against the “expectations” component of CB’s consumer confidence series:

Finally, the Commerce Department’s Bureau of Economic Analysis released its Current Account data (USCURA=ECI) for the second quarter, which showed the deficit narrowed by 11.1% to $251.1 billion.

The series tracks the trade balance of goods and services, foreign investment and transfers, which include some things as foreign aid and remittances.

The gap shrinkage is due, in large part, to a bump in exports, which helped mitigate the 0.6% GDP contraction in the April to June period.

”(The Fed’s) restrictive stance, as well as a weakening economic backdrop abroad, will dampen trade flows through the remainder of the year,” says Matthew Martin, U.S. economist at OE.

Of course, any data that harkens back to the second quarter is ancient history, economically speaking.

Wall Street seemed intent on extending Wednesday’s retreat in morning trading.

All three major U.S. stock indexes are red, with the tech-laden Nasdaq - and, notably, chips (.SOX) leading the declines.

Interest rate sensitive market leaders Tesla (TSLA.O) , Apple

(AAPL.O) and Amazon.com (AMZN.O) are doing the most damage to the main indexes.

(Stephen Culp)


CAN U.S. STOCKS STEM THE RED TIDE? (0944 EDT/1344 GMT)

Wall Street’s main indexes are in the red early on Thursday as investors assess the impact on U.S. economic growth from the Federal Reserve’s unwavering focus to rein in inflation through aggressive interest rate hikes. (.N)

This, after a wave of selling and near-3% two-day slide for the S&P 500 index (.SPX) through Wednesday’s close.

Goldman Sachs, Barclays and a bunch of investment banks raised their estimates for U.S. policy rates on Thursday.

Goldman revised their forecast for rate hikes to 75 basis points (bps) in November, 50 bps in December, and 25 bps in February, for a peak funds rate of 4.5-4.75%, versus 4-4.25% previously.

Meanwhile, the Japanese yen strengthened on Thursday after authorities intervened in the foreign exchange market to shore up the battered currency for the first time since 1998.

The U.S. dollar index (=USD) , after hitting its highest level since June 2002, is dipping.

And the U.S. 10-Year Treasury yield (US10YT=RR) hit 3.6542%, which is its highest level since February 2011.

Here is a snapshot of where markets stood shortly after Thursday’s open:

(Terence Gabriel)


NASDAQ COMPOSITE: THIS IS SO WEAK, IT MAY BE A POSITIVE (0900 EDT/1300 GMT)

The Nasdaq Composite (.IXIC) stands down 30% on a closing basis from its November 2021 record-high.

Meanwhile, one measure of internal strength, on a monthly basis, has been fantastically weak. It is now nearing its record low, suggesting the potential that the Nasdaq’s protracted and brutal decline may be especially ripe for a turn:

The Nasdaq New High/New Low index is on a record monthly losing streak. It is now on pace to fall for a 19th straight month. Its previous record losing streak was a 14-month run of losses in 2007-2008.

With the current decline, the measure has plunged to 15%, or its lowest level since a 14.9% reading in April 2009. This measure’s record low was at 10.3% in March 2009. That marked the end of what was a 54% Nasdaq collapse on a closing basis from what was then its October 2007 record high.

Looking at this measure’s behavior over time, periods of divergence have warned of the risk of a major top. For example, most recently, this measure peaked in February 2021 at 83.5%. It ended November 2021 at 62.9%, the month of the Nasdaq’s record high.

Admittedly, dealing with lows appears somewhat trickier. However, it has tended more toward V-bottoms, and has not shown a tendency to flat line. That said, it could always break 10.3%, and fall closer to zero.

However, as this measure flirts with its record low, traders will be watching for any uptick. Based on its history, slicing up through the descending 10-month moving average, now at 32.8%, would signal building internal strength that could potentially lead to a multi-month IXIC consolidation phase, or a major advance.

(Terence Gabriel)


FOR THURSDAY’S LIVE MARKETS’ POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:

IXIC09222022

earlytrade09222022

Jobless claims

Leading indicators

Current account

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)

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