EmailThe equity market has had a rough go of it so far this week. Plagued by concerns over Europe, China, and more partisan babbling in Congress, the S&P 500 has declined 3.5% over the past three sessions.
Things are looking a little better today, however, as the S&P futures are trading 1.2% above fair value.
The rebound effort has been forged on the back of a better-than-expected bond auction in Spain, better-than-feared manufacturing survey data out of China and the eurozone, better-than-expected earnings results from FedEx (FDX), which reaffirmed its fiscal year guidance on an expectation for moderate growth for the global economy, and better-than-expected U.S. economic data (more on that in just a bit).
It could have been a clean sweep, but Congress is still Congress. With the holiday break approaching rapidly, Congress has still not agreed to a plan that will keep the government running through the end of its fiscal year and it still has not agreed to an extension of the payroll tax cut and unemployment benefits.
Of course, we still get the party line (choose your party) that "Congress needs to do the work the good American people elected it to do".... blah, blah, blah.
Shifting gears to more encouraging topics, the initial claims report for the week ending December 10 showed claims dropped 19,000 to 366,000 (Briefing.com consensus 390,000). That is the lowest level of initial claims since May 2008. The 4-week moving average decreased by 6,500 to 387,750. The 4-week average is trending in the right direction to lend confidence to the idea that nonfarm payrolls should grow in excess of 100,000.
Continuing claims for the week ending December 3 increased by 4,000 to 3.603 mln (Briefing.com consensus 3.650 mln). The 4-week moving average dipped slightly to 3.666 mln.
The Empire Manufacturing survey checked in with a reading of 9.53 for December (Briefing.com consensus 3.0) versus 0.61 in the prior month, accented by a jump in the new orders index and a pickup in the six-month outlook. A number above zero reflects an expansion in manufacturing activity for the New York Fed region.
Separately, the Producer Price Index for December jumped 0.3% (Briefing.com consensus +0.1%), led by a 1.0% increase in food prices, half of which flowed from a boost in prices for fresh and dry vegetables. The December reading left finished goods prices up 5.7% year-over-year on an unadjusted basis. That is the smallest increase since a 5.6% increase in March 2011.
Excluding food and energy, core PPI rose a tame 0.1%, resulting in a 2.9% year-over-year increase.
The Industrial Production report for November (Briefing.com consensus +0.2%; prior +0.7%) and the Philadelphia Fed survey for December (Briefing.com consensus 4.5; prior 3.6) will follow at 9:15 a.m. and 10:00 a.m. ET, respectively.
At this juncture, the equity market appears set to table the negative considerations and to follow the good news for a welcome change in direction.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
