Market Talk

- Despite China’s placating yuan flexibility, tensions with the U.S. over the currency may still flare up, Yves Smith writes at naked capitalism. “The real determinant will be economic performance. If the growth falters and unemployment rises, which we deem likely, then the pressure on the president and Congress to Do Something will also rise. And the next window for certifying China as a currency manipulator is mid-October, temptingly close to mid-term elections.”

- As the relief thing goes these days, relief that the end of the ECB’s big financing program won’t cause havoc may be short-lived. “Now that we know we’re looking at a two-tiered existence for eurozone banks – those that can fund themselves in the interbank market and those that still have to rely on the ECB – we can guess that a rapid rise in rates could be difficult for some to take. In which case, we could still see rates like Eonia and Libor rise on fears of bank counterparty risk. It’s a tough job, this weaning-off-liquidity thing.”

- Google (GOOG) says it’s “going the extra mile” to treat employees fairly by paying for additional taxes that gay employees must pay when their partners receive domestic partner health benefits. In a blog post on Thursday, the company says it will start “grossing-up” imputed taxes on health insurance benefits for all same-sex domestic partners in the US, retroactive to Jan. 1. The progressive moves could have a ripple effect among Silicon Valley companies competing for the same talent.

- Oh, sure, blame the media. “The combined efforts of the bearish blogging network, the televised media (“What are the chances of a double dip, Mr. X?”), and the technical community (If we close a couple of points below 1040, the next stop is 20% lower), have scared the daylights out of the average investor,” writes Jeff Miller, CEO of NewArc Investments, at A Dash of Insight. “My guess is that Friday’s employment report will make matters even worse.”

- June was another difficult month for risky assets, with REITs and US stocks suffering the worst of the declines, each dropping more than 5%, while bonds performed fairly well. “But don’t let June mask the broader trend,” James Picerno notes at The Capital Spectator. “Stepping back and considering the first half of 2010, there are more losses, and deeper ones among the major asset classes.”

- “All we can say with any degree of confidence is that we see growth slowing, and await more data prior to making a recession call,” Barry Ritholtz says at The Big Picture.

- “Euroland is right to place deficit reduction at the top of its priority list,” former Dallas Fed President Bob McTeer says. “We should place it close to the top. We should be careful, however.”

- Michael Shedlock doesn’t offer a rosy interpretation to today’s jobless claims, pending home sales and manufacturing reports. “This data should be enough for anyone of sound mind to question the recovery.”

- WSJ’s Matt Phillips notes Doug Kass calls another bottom. Nevermind the fact that he missed the top, the hedge fund manager is still confident in his call.

- Only my Mets could pull off something as ridiculous as this. Thanks to a deferred buyout, the Mets still owe Bobby Bonilla 25 annual payments of $1.19 million. Yes, that Bobby Bonilla. No one ever said it was easy being a Mets fan.

US stocks pared earlier triple-digit losses but still finished in the red amid disappointing jobs, housing and manufacturing data ahead of tomorrow’s monthly employment report.

DJIA closes off 41 at 9733, marking its lowest closing value since October 30. The measure has dropped in six straight sessions, losing 5.5% of its value in the process, and has fallen in eight of the past nine trading days, overall. The losing streak marks the longest skid since Jan. 14, 2009. S&P 500 drops 3 to 1027 and Nasdaq Comp falls 8 to 2101.

Weekly jobless claims come in worse than expected, US pending-home sales plunged 30% in May and ISM’s manufacturing index fell more than expected. Yuck.

Stocks were able to bounce off session lows, but the bears are in the drivers seat this week and there’s currently no evidence suggesting anything’s about to change.

All eyes focused on monthly nonfarm payrolls tomorrow ahead of the holiday weekend.

US stocks falling yet again on, you guessed it, increasing concerns about the economic recovery. Yes, that’s a broad reason that always seems to get cited on a down day, but today the problem is magnified in the form of disappointing housing, employment and manufacturing data.

US pending-home sales plunged 30% in May, offering yet another piece of evidence of what the housing market will look like without the federal government’s home-buyer tax credit. Additionally, jobless claims increased by 13,000 to 472,000, not a good sign, especially since they need to trend toward 400,00 — not 500,000 — for substantial job growth. Then the ISM’s June manufacturing index dropped more than expected.

With all those negative factors weighing on the market, FusionIQ CEO Barry Ritholtz looks at the three C’s — clarity, conviction and consensus — to try to determine sentiment behind the recent market action. Unfortunately, there’s little clarity, he says, as there isn’t any substantial evidence the market has bottomed or topped at this moment.

There’s also little conviction. “The bears have had the upper hand for two months, yet we don’t see the shorts pressing their bets,” he says.

As for consensus, everyone seems to believe a double dip is coming. But Ritholtz has his doubts. “I cannot recall the last time a) so many people were projecting a recession, b) the crowd got it right,” he adds.

Continue reading…

So the third quarter’s starting off as bad as the second quarter ended. It’s getting ugly all over, and there’s nothing out there right now to turn the tide. That’s what we’re talking about on the Markets Hub.

I give up.

There’s nothing pretty about this morning’s jobless claims report.

Claims jump 13,000 to 472,000 in the week ended June 26. The previous week’s level was also revised upward, from 457,000 to 459,000. And all this comes as economists had expected claims would fall by 2,000.

“This is unquestionably a negative, even more so we as we see the Southern states that might be affected by the oil spill not accounting for a large uptick in claims,” Miller Tabak’s Dan Greenhaus writes.

As we mentioned in the opener, a Labor Department economist blames the latest rise on the educational services sector, where bus drivers, cafeteria workers and others lost their jobs due to the summer holidays.

What a crock of … I mean, c’mon. Think about it, the school year coming to an end isn’t some brand new phenomena; it happens every year at the exact same time. Isn’t seasonally adjusted data supposed to take these sort of situations into account?

It also seems like the Labor Department always has an excuse in its back pocket whenever there’s an “unexpected” rise in jobless claims. Remember in early April when the increase in claims was attributed to Cesar Chavez Day? Really?

“These are not normal times, there is not large demand for labor and as such, people whose benefits are going to run out will simply not have the spending power necessary to help drive growth,” Greenhaus adds. “This necessitates a slightly more bearish outlook for growth in the third quarter.”

Delving deeper into the data shows total unadjusted continuing claims for workers collecting more than one week from state, extended and emergency benefits fell to 9.23M in the June 12th week, from 9.60M the week before.

A silver lining? Not quite. Don’t read much joy into the decline — much of it was in the emergency program, which lapsed after the Senate did not act, so long-term workers are exhausting their eligibility and falling off the rolls.

“Bottom line, following the weak private sector job growth seen in yesterday’s ADP report, today’s initial claims data continues to point to a lackluster labor market and another jobless recovery,” says Peter Boockvar, also of Miller Tabak.

(Paul Vigna and Kathleen Madigan contributed to this post.)

This whole Markets Hub thing is evolving, so now our show is going to be coming out on WSJ.com around 11, and we’re also doing sort of in-show hits on the flagship News Hub shows at both 8:30 a.m. and 4 p.m. So this morning I was on with Kelly Evans, David Widener and Mark Hulbert discussing the outlook for the third quarter.

I’ll tell you, I’m not in the the Richard Russell “you won’t recognize America” camp, but I think we’re in for a pretty ugly swing down here. I’m at least in the “batten the hatches” camp.

It's not looking pretty out there.

No time to mourn the dour second quarter, it’s over and done with and now we’re in the third quarter. Technically speaking, though, for stocks at least, the quarter is starting with a lot against it.

There’s a sell signal from the Dow Theory camp, there’s a completed head-and-shoulders reversal, and the “dead cross” is right at the crossroads. It’s going to take some seriously good news to flip the script. Or it may confirm the gloom; China’s PMI report today was a disappointment. And jobless claims just stunk up the joint.

New claims for jobless benefits increased by 13,000 to 472,000 in the week ended June 26. The previous week’s level was revised upward as well, from 457,000 to 459,000. Economists had expected claims would fall by 2,000.

Although this week’s number comes after the Labor Dept.’s June jobs survey, the increase indicates the labor markets remain extremely weak heading into 2H10.

To be sure, an economist at the Labor Department says the latest rise in new jobless claims is mostly coming from the educational services sector where bus drivers, cafeteria workers and others lost their jobs due to the summer holidays. Doesn’t it seem like the Labor Department always has an excuse for an “unexpected” rise in jobless claims? How about just admitting prospects for the labor market don’t look so bright?

Other data later this morning includes ISM manufacturing, construction spending, pending home sales and car sales.

S&P futures down 4.7; 10-year down a bit, yield up to 2.936%.

(Kathleen Madigan and Steven Russolillo contributed to this post.)