Market Talk

A little perspective on today’s economic data:

- January CPI “completes a trifecta of inflation reports that showed both overall and core inflation ahead of expectations,” RDQ Economics writes. “The Fed remains focused on core inflation at the consumer level, which it thinks will be restrained by high unemployment, and largely dismisses higher food, energy, and commodity prices as being influenced by the ultra loose stance of monetary policy,” firm says.

“We are not Phillips Curvers and we are increasingly concerned that inflation is headed higher.” RDQ notes evidence in latest report “that even core CPI inflation has bottomed and has begun to move higher,” and price increases “were fairly broad-based.”

- Weekly initial jobless claims “were worse than expected rising to 410k (400k consensus), but that gain was from a weather induced low of 385k, a number that was not real,” writes Eric Green, chief US rates strategist at TD Securities. “What is real is that the weather distortions are now purged from the claims data and we are left at a 4 week moving average of 417k, essentially unchanged from last week,” he notes. “We need to get below 400k and stay there if the market is to buy in to sustained improvement in the labor market.” Continue reading…

- Digital Daily blogger John Paczkowski picks up on an interesting Apple (AAPL) factoid: Its 2Q retail store revenue soared 73% from a year ago to $2.6B. To put that in perspective, AAPL’s store revenue was greater than the company’s total quarterly revenue from 2Q of fiscal 1996 through 4Q of fiscal 2004. IPad is the catalyst.

- “By showing it’s smart enough to swallow its pride and get rid of bad ideas, like Wave and the Nexus One store, Google is showing us it’s probably smart enough to come up with some really successful ideas, too,” Dan Frommer writes at SAI.

- “It’s an uncomfortable moment for a Google fanboy,” Jeff Jarvis says. The company is getting so big it’s becoming unwieldy, as a string of recently launched products, which all failed, shows. “All of these are just early warning signs. It’s good…to see these cracks because, used properly, they are lessons that help a company get back on its track.”

- Warren Buffett rounding up 40 of America’s richest families or individuals and having them donate at least half their fortunes to charity is certainly an admirable act. “But I’m also appalled at what this reveals about how much money is now concentrated in so few hands,” former labor secretary Robert Reich says, especially as 15 million Americans are still out of work and median hourly wages keep dropping. “Most Americans don’t need charity. They need good jobs.”

- Initial jobless claims jump 19,000 to 479,000, their highest level since early April. No wonder Treasurys rallied today, while stocks fell. “Until the economic data signals a change in the trend, yields will inch lower, fears of deflation will continue to bubble,” notes James Picerno. “And the crowd will be increasingly open to arguments that the ‘new normal’ has legs.”

- “In a deflationary environment, unemployment is a coincident indicator, not a lagging one,” Josh Brown writes at The Reformed Broker,  while pointing to data from 1970 to 1982 as proof. “Unemployment began to rise as the economy slowed down and peaked at the nadir of economic activity. The deflationary recessions of that period are more apropos to what we’re experiencing now than anything post 1990. No jobs = no soup for you.”

- The expected return of “quantitative easing” measures from the Fed won’t fix the economy’s actual problems, portfolio strategist Marshall Auerback writes at naked capitalism. “The Fed’s fixation on credit growth is curiously perverse, given the high prevailing levels of private debt.”

- BLS readings on private nonfarm payrolls during 1H have been notably higher than ADP monthly data. “Most likely the correct number is somewhere between ADP’s number which does not factor in new business creation, and the BLS number which I believe hugely overstates it,” says Michael Shedlock.

- The debate about unemployment largely centers around whether the jobless problem is cyclical, meaning more government action can improve the situation, or structural, where there’s not much the government can do. “We don’t know the exact structural-cyclical breakdown, but the cyclical problem is certainly larger than any imaginable Congressional response,” writes Mark Thoma. “So the excuse for inaction based upon the ‘it’s all structural’ claim isn’t persuasive.”

- Mark Cuban chronicles his failed chase of the Texas Rangers.

Gosh, it's so much better this time around, eh?

How, exactly, is this supposed to make me feel better?

The job numbers may be weaker than some are expecting. However, dips in the job numbers and in these other indicators do not necessarily mean an early sequel to the recession.

We are still in the relatively early stages of the recovery. Considering how long and deep the recession was, it is only natural that the recovery has some ups and downs. Remember, it took 21 months before we saw consistent job gains following the 2001 recession, and that was considered a mild recession.

That’s the take from John Challenger, the CEO of Challenger Gray, the big outplacement firm, which trotted out an upbeat press release this morning after that bad report on initial jobless claims. But, honestly, how in God’s name is that supposed to be a comforting thought? How? It took nearly two years for employment to stabilize after the “mild” 2001 recession. So, how long is it going to take this time around, after the worst recession in 80 years? Four years? Five years? Ten?

How is that comparison in any way, shape or form comforting or favorable? Honestly, for crying out loud, that’s the reassuring pat on the back? How much blinder can you be?

When we’re done writing this quarter’s Upshot column (we’re working on the last one today, actually,) I’m going to do a post showing how weak, tepid and weak, the pronouncements of strength from the bulls and the economic cheerleaders really are these days.

The tone hasn’t changed, but the words definitely have.

Since US stocks’ robust rally Monday, there’s been a certain feel to the market as if participants are just waiting for something “to happen.”

Maybe that’s just a sense of anticipation ahead of tomorrow’s July nonfarm payrolls report, but with the 2Q corporate earnings story mostly written (they were very good, by the way, as expected), it’s logical to wonder what comes next.

Stocks rallied strongly into every earnings period during the past year, only to relinquish all their gains by the time the season was winding down. And that was with improving economic data as a backdrop, something that’s recently gone missing.

Initial weekly jobless claims due at 8:30 a.m., and bevy of July chain-store sales reports out this morning. S&P futures down 0.20, DJ futures up 4. Ten-year a shade higher, yield at 2.94%.

- A wider probe of Wall Street may ease the heat on Goldman. “If everyone is guilty, nobody is guilty,” Joe Weisenthal writes at Business Insider. “That principle doesn’t apply in a legal sense, but we think it applies in a reputational sense. There’s no good reason to leave Goldman for some other firm, if in the end their behavior was very similar.”

- Determining what caused the financial crisis has taken on a shift in narrative, Mark Thoma notes at Economist’s View. “Fraud, deception, and other questionable if not illegal behaviors are beginning to take on a larger role in the story of what happened to bring about the problems in the financial sector.”

- Gold surged to another all-time high yesterday as fears of EU’s bailout plan represents another “step down the road to severe inflation or debasement of paper currencies, or both,” Tom Petruno says. “And after last week’s stock market ‘flash crash,’ prudence is all the more in vogue.”

- Initial jobless claims dropped 4,000 to 444,000. The four-week moving average also ticked lower to 451,000, a six-week low. But “for an economy that has begun creating jobs again, claims should be running below 400k at this point in the recovery and thus implies that this recovery is not your typical one,” writes Miller Tabak equity strategist Peter Boockvar.

- Claims have been bouncing around 450,000 for much of 2010, and “it’s still unclear if claims will break through this floor any time soon,” James Picerno says. Still, two months of job growth have renewed hope, suggesting either jobless claims will finally begin to tail off or the rebound in nonfarm payrolls will stall out. If that happens, investors should watch out.

- Adobe (ADBE) hearts Apple (AAPL) in its latest newspaper ad. And it was only a matter of time before the Adobe founders jumped into the Apple-Adobe-Flash fray. They published their own essay about the importance of open standards on a new section of Adobe’s website dedicated to choice.

- Recovery chatter is running rampant, especially with retail sales up and the labor market improving. But Mike Shedlock, an investment advisor for SitkaPacific Capital, still isn’t convinced. “Believe what you want, but I refuse to believe a recovery is in progress when federal income tax collections are off a half trillion dollars, and state after state is still showing declining revenue,” Shedlock says.

- Rumored BlackBerry tablet doesn’t sound so hot. Boy Genius Report confirms the device will be 9.9″ large and should be ready for a December launch. But “RIM employees have privately voiced their frustration to us regarding this initiative,” BGR says.

- “It’s not a promising sign for RIM if its own employees are thinking the BlackBerry tablet will be DOA,” Jay Yarow writes at Silicon Alley Insider. “Overall, the tablet sounds pretty dull and uninspired.”

- “History books will one day describe this stretch as one of the most interesting and important junctures ever for the financial market construct,” Todd Harrison writes at Minyanville. “The script is still being written, which is why we need proactive stair-step solutions rather than reactive blame and haphazard policy. I’m not exaggerating when I say the future of free-market capitalism hangs in the balance.”

- “It’s looking like more individual investors just can’t stand being on the sidelines anymore as the stock market continues to rally,” Tom Petruno writes.

- Bullish sentiment is on the rise in recent weeks. But keep in mind “as quick as [investors] have been to embrace rallies, they have been just as quick to abandon them,” Bespoke says.

- As good as recent economic data has been, high unemployment levels should keep investors “very hesitant to erupt in full-throated rejoicing at the turnaround in the American economy,” Free Exchange says.

- Is Newsweek’s cover story touting the economy’s “remarkable turnaround” a contrary indicator, or just plain contrary?

- Europe appears to be heading down a slippery slope.

- Initial jobless claims jumping for a second consecutive week shows the labor market hasn’t quite joined the recovery fiesta.

- Yesterday’s strong retail sales report shows the consumer is finally showing real signs of life. “Even a relative pessimist like me has to admit that recent trends look pretty good,” Tim Duy writes.

- Requiring commercial banks to separate derivatives operations from commercial banking activities looks nice on paper, but Yves Smith at naked capitalism remains skeptical it will solve the systemic risk posed by OTC businesses.

- AAR reports rail traffic rose 7.5% in March compared to a year earlier, which Calculated Risk notes is the first year-over-year increase since July 2008. Sure, it’s a step in the right direction, but recovery in rail traffic still has a long way to go.

- Harbinger Capital discloses it’s purchased 16M shares of Palm. “Somebody, somewhere is going to buy Palm. And they’ll end up paying more for it than the market thinks it’s worth today. That’s the thinking behind hedge fund Harbinger Capital’s bet,” Peter Kafka says.

- Here’s a new one. Obama administration approaches Microsoft (MSFT) about creating a video game about balancing US budget. Erskine Bowles, leader of Obama’s 18-member budget-balancing commission, says the game “would enable anyone with a computer to take a stab at balancing the budget” and would definitely “go viral.”

Abbondanza!

Worries about Greece and additional evidence of a troubled labor market hampered stocks this morning. The Dow fell as much as 53, on the heels of yesterday’s 72-point decline, suggesting profit-taking was setting in after this recent run-up.

And just as quickly as we started to digest the declines, stocks reversed course and now sit comfortably in positive territory. Strong same-store sales as well as optimism about the beginning of earnings season are being cited for the turnaround.

Hmm, weren’t those catalysts present early this morning? And unless I’m missing something, Greece’s problems haven’t been solved in a few hours and the weak labor market is, well, still weak.

Perhaps investors are merely ignoring external factors, while following a specific playbook. Buying the morning dips as well as going all-in on Friday afternoons in anticipation of Monday rallies has been the recipe for success in recent months, the Pragmatic Capitalist points out. And that’s exactly what’s taking place today.

“Apparently, the stock market has turned into an easy game,” Pragmatic Capitalist says. “Whether that is comforting or the absolute most frightening thing in the world is beyond my realm of knowledge, but history has proven that when one strategy or mindset starts to dominate it always breaks down in horrific fashion.”

Dow reversed earlier losses and was recently up 50.

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Too bad these Census jobs aren't permanent.

As investors eagerly await tomorrow’s March jobs data, today’s initial jobless claims provided the latest hint toward what the report might bring.

Unfortunately, today’s data didn’t tell us anything we didn’t already know.

Folks filing new claims for jobless benefits fell 6,000 to 439,000 in the week ended March 27, a smidgen better than expected as economists anticipated claims would decline by 2,000. The previous week’s level was revised upward to 445,000 from 442,000.

On the bright side, the four-week moving average fell to the lowest level since Sept. 13, 2008, just prior to Lehman’s collapse and height of the credit crisis.

But temper your enthusiasm for the ongoing decline in initial jobless claims, because emergency unemployment claims spiked up again. The gauge has been volatile week-to-week this year, and is back near the cycle high after a decline in last week’s report.

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- Good timing for jobless claims to post biggest weekly decline since last summer, James Picerno writes at The Capital Spectator. Drop comes on the heels of two consecutive weekly increases, which prompted fears that the declining trend since March may’ve run its course.

- Even amid the good jobless claims data, keep in mind the pace of firings has diminished, but hiring still seems to be on hold, Miller Tabak’s Peter Boockvar says.

- Financial reform chatter is getting tougher. Larry Summers is the latest to chime in. “We’re certainly emphasizing regulating the bankers now, not supporting the kind of irresponsible growth that we saw historically,” he says. Simon Johnson weighs in.

- Is Google stalling on its “new approach” to China? It’s been a month and Google still censors its search results. “Is the moral high ground the company claimed a month ago proving just a bit too high?” Digital Daily blogger John Paczkowski ponders.

- S&P 500, which firmly traded in overbought territory for months, not finds itself in oversold territory, where it’s been since mid-January, Bespoke Investment Group says.

- If treasury yields break to the upside alongside corporate bond yields, “there is a distinct possibility…that there may be no places to hide in 2010 other than perhaps the much despised US dollar,” says Mike Shedlock, an investment advisor for Sitka Pacific. “Risk is very high, and rising.”

- Dell’s latest deal, acquiring Kace Networks, looks like a “savvy” move.

- Blogs rip Google for privacy concerns surrounding Buzz.

- Furloughs, wage freezes continue at USA Today. “We will evaluate business conditions on a quarterly basis and institute a fair and equitable compensation increase plan as soon as conditions permit,” Gannett Blogger Jim Hopkins reports.

- About a quarter of the 8.4M jobs eliminated since recession began won’t be coming back, according to economists polled in WSJ’s latest survey.

Number of workers filing initial claims for jobless benefits unexpectedly rose for the second week in a row, which is a cause for concern, but still isn’t reason to panic.

Jobless claims rose 8,000 to 480,000 for the week ended Jan. 30, while economists surveyed by Dow Jones Newswires expected claims to decrease by 10,000. The gains come after last week’s results showed claims rose by 36,000. Data throughout last two weeks present a stark contrast to the downward trend of declining claims since they peaked in March.

“We’re bumping up against the thin line of statistical noise vs. a turn for the worse in the generally improving trend of initial jobless claims,” James Picerno writes at The Capital Spectator. “Exactly where and when one gives way to the other is debatable and inherently speculative in real time.”

Job growth in tomorrow’s monthly employment report could ease some concerns. But it’s possible the decline in initial jobless claims is stalling, he notes. “It’s too soon to say for sure, of course, but the possibility is suddenly no longer beyond the pale.”

To make matters worse, the number of people filing for emergency unemployment compensation – essentially folks who’ve exhausted their standard initial jobless benefits – took another big jump, with 281,000 people claiming the extended benefits in the week ended Jan. 16. These numbers are reported within the weekly claims report, but with a two-week lag.

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