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Initial Jobless Claims Hold Flat Excluding Revisions

No Change in Initial Claims


Initial claims were flat at 423k WoW, as the 3k headline decline was offset by the 3k upward revision to last week’s print.  Rolling claims rose for the first week in six to 426k, 2.5k higher than the previous week.  We continue to remind investors that based on our analysis of past cycles, the unemployment rate won't improve until we see claims move into the 375-400k range. That said, it is worth highlighting an important caveat. This recession has been different in that it has pushed the labor force participation rate down by ~200 bps, which has had a correspondingly positive improvement on the unemployment rate. In other words, the unemployment rate isn't really 9.5%, it's 11.5%. So when we say that claims of 375-400k will start to bring down the unemployment rate, we are actually referring to the 11.5% actual rate as opposed to the 9.5% reported rate.

 

Initial Jobless Claims Hold Flat Excluding Revisions - rolling claims

 

Initial Jobless Claims Hold Flat Excluding Revisions - raw claims

 

Yield Curve Comes In Slightly


We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 4Q is tracking 20 bps wider than 3Q.  The current level of 272 bps is down from 287 bps last week.

 

Initial Jobless Claims Hold Flat Excluding Revisions - spread

 

Initial Jobless Claims Hold Flat Excluding Revisions - spreads QoQ

 

Financial Subsector Performance


The table below shows the stock performance of each Financial subsector over four durations. 

 

Initial Jobless Claims Hold Flat Excluding Revisions - performance

 

Joshua Steiner, CFA

 

Allison Kaptur

 


INITIAL JOBLESS CLAIMS HOLD FLAT EXCLUDING REVISIONS

No Change in Initial Claims

Initial claims were flat at 423k WoW, as the 3k headline decline was offset by the 3k upward revision to last week’s print.  Rolling claims rose for the first week in six to 426k, 2.5k higher than the previous week.  We continue to remind investors that based on our analysis of past cycles, the unemployment rate won't improve until we see claims move into the 375-400k range. That said, it is worth highlighting an important caveat. This recession has been different in that it has pushed the labor force participation rate down by ~200 bps, which has had a correspondingly positive improvement on the unemployment rate. In other words, the unemployment rate isn't really 9.5%, it's 11.5%. So when we say that claims of 375-400k will start to bring down the unemployment rate, we are actually referring to the 11.5% actual rate as opposed to the 9.5% reported rate.

 

 INITIAL JOBLESS CLAIMS HOLD FLAT EXCLUDING REVISIONS - rolling claims

 

INITIAL JOBLESS CLAIMS HOLD FLAT EXCLUDING REVISIONS - raw claims

 

Yield Curve Comes In Slightly

We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 4Q is tracking 20 bps wider than 3Q.  The current level of 272 bps is down from 287 bps last week.

 

INITIAL JOBLESS CLAIMS HOLD FLAT EXCLUDING REVISIONS - spread

 

INITIAL JOBLESS CLAIMS HOLD FLAT EXCLUDING REVISIONS - spreads QoQ

 

Financial Subsector Performance

The table below shows the stock performance of each Financial subsector over four durations. 

 

INITIAL JOBLESS CLAIMS HOLD FLAT EXCLUDING REVISIONS - performance

 

Joshua Steiner, CFA

 

Allison Kaptur


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - December 23, 2010


As we look at today’s set up for the S&P 500, the range is 11 points or -1.01% downside to 1245 and 0.01% upside to 1259.  Equity futures remain near flat to fair value on a slow news day, ahead of several economic reports, including Weekly Jobless Claims and December final Michigan Consumer Sentiment.

 

Oil futures have climbed to a near two year high as cold weather across the US and Europe lifts demand.

 

After the close, Bed Bath and Beyond reported consensus beating quarterly earnings and provided an upbeat outlook.

  • Amylin Pharmaceuticals (AMLN) and Lilly submitted sNDA to FDA for expanded use of Byetta injection
  • Bed Bath & Beyond (BBBY) sees full year EPS $2.86-$2.90 vs est. $2.81, announces $2b buyback
  • Crocs (CROX) said CFO Russell C. Hammer resigned, effective Dec. 31
  • Micron Technology (MU) reported 1Q rev. $2.25b vs est. $2.37b
  • Watson Pharmaceuticals (WPI) said its oral contraceptive won FDA approval
  • Wintrust Financial (WTFC) sees $11.4m charge related to repurchase of 250k shares issued under TARP

PERFORMANCE

  • One day: Dow +0.23%, S&P +0.34%, Nasdaq +0.15%, Russell 2000 +0.01%
  • Month-to-date: Dow +5.03%, S&P +6.63%, Nasdaq +6.93%, Russell +8.75%;
  • Quarter-to-date: Dow +7.15%, S&P +10.31%, Nasdaq +12.79%, Russell +16.93%
  • Year-to-date: Dow +10.85%, S&P +12.89%, Nasdaq +17.73%, Russell +26.42%
  • Sector Performance: Financials +1.1%, Utilities +0.5%, Energy +0.4%, Consumer Spls +0.4%, Industrials +0.3%, Health-care +0.2%, Consumer Disc +0.1%, Materials 0.00%, Tech (0.04%).             

 EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 678 (-478)  
  • VOLUME: NYSE 784.28 (-3.24%)
  • VIX:  15.45 -6.31% YTD PERFORMANCE: -28.74%
  • SPX PUT/CALL RATIO: 2.75 from 1.54 (+78.64%)

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 17.30
  • 3-MONTH T-BILL YIELD: 0.14%  
  • YIELD CURVE: 2.71 from 2.72

COMMODITY/GROWTH EXPECTATION:

  • CRB: 328.11 +0.40%
  • Oil: 90.48 +0.73%
  • COPPER: 427.50 -0.02%
  • GOLD: 1,387.33 +0.05%

CURRENCIES:

  • EURO: 1.3087 -0.25%
  • DOLLAR: 80.727 +0.01%

OVERSEAS MARKETS:

EUROPEAN MARKETS:

  • European markets saw session highs early, the FTSE100 flirted with the 6000 level, and subsequently drifted lower in light trading.
  • Comments from a Chinese Foreign Ministry spokesman that China was willing to help EuroZone countries recover from the financial crisis helped sentiment as did Greece passing its 2011 austerity budget last night.
  • Advancing sectors lead decliners 12-6 with autos and media the leading gainers whilst basic resources and construction lead fallers.
  • This is the last trading day for much of Europe ahead of the Christmas holiday with only France, Belgium, Ireland, Netherlands, Portugal and the UK open tomorrow.
  • France Nov consumer spending +2.8% m/m vs consensus +0.8%
  • France Nov PPI +0.4% m/m vs consensus +0.2%
  • UK Nov mortgage approvals for home purchase 29,991 vs prior 30,689, net mortgage lending +£1.46B vs +£1.72B, lowest since Mar and Aug 2009 respectively

ASIAN MARKTES:

  • Asian markets were mixed today; with more falling the later they were open.
  • Volumes remained low.
  • Bank stocks rose in Australia. Miners went up after the country’s Policy Transition Group made what were interpreted as favorable recommendations on the imposition of a mining tax.
  • New Zealand’s gain was limited when Q3 GDP declined (0.2%) vs consensus (0.1%). Shoe retailer Pumpkin Patch lost 1%.
  • South Korea ended flat despite tensions on the peninsula when President Lee Myung Bak promised troops the country would launch a “merciless counterattack” if North Korea attacks again.
  • Rises in retailers and property were outweighed by falls in financials, and Hong Kong reversed slim gains to finish at a loss.
  • China fell again on an end-of-year cash crunch in the financial system. Oil refiners fell on fears yesterday’s fuel price increases will raise their operating costs: Sinopec Shandong Taishan Petroleum lost 3%.
  • Japan was closed for the Emperor’s Birthday.

 

THE HEDGEYE DAILY OUTLOOK - EQUITIES


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Taxing Onions

“Inflation is taxation without legislation.”
-Milton Friedman
 
Ben Bernanke got what he ordered for Christmas - global inflation.
 
While economic news in the US is light this morning, the rest of the world is waking up to continued signals that Global Growth is Slowing as Global Inflation Accelerates.
 
With Chinese Equities closing down for the 6th out of the last 7 trading days in Shanghai (China is down -12.9% YTD), here are the 3 most important inflation headlines that continued to pressure Asian Equity markets overnight:
 
1.       India’s weekly wholesale food inflation accelerated to +12.13% versus +9.46% last week
2.       Singapore reported another sequential acceleration in consumer prices (CPI) to +3.8% in NOV vs +3.5% in OCT.
3.       CRB Commodities Index closed at another YTD high of 328 = +15% since OCT and +29% since JUL.
 
Unlike in the US where the government has changed the inflation calculation 9 times since 1996 and tells you to focus on the “core” (no gas in your car, heat in your home, or food in your belly), India’s food inflation index includes the things that people eat. Things like lentils, veggies, and rice are very popular items for consumption.
 
Onions are a sought after food item in most parts of the world as well. It’s hard to fire up your curry without onions and the Indian government takes this practical matter quite seriously. India is calling for “emergency measures” this morning to address the onion supply imbalances due to rainfall damaged crops. Global food and water supply shocks? Heli-Ben, what are those?
 
Not that the people making curry for the holidays notice this (they’re probably much more focused on Quantitative Guessing and how great that is for Americans who still have 401k’s that aren’t choking on bond allocations), but the price of onions is up +34% year-over-year.
 
We get the year-end storytelling about “cheap” American stocks and how the world is awash with fiat currency, but we also get that inflation is a policy. Governments either fight it or perpetuate it – and there’s an Eastern versus Western view of the world emerging on this front.
 
Inflation is the #1 fear of emerging market economies and global bond investors alike. That’s why China, India, and Brazil’s stock markets have been going down since November. These markets apparently don’t care so much for how many 600 thread count sheets Americans are buying at Bed Bath and Beyond.
 
As global inflation accelerates the US Dollar Index and US Treasury yields are also rising. Again, the bulls are saying what they said on this score back in 2007 (after 64 consecutive quarters of positive US consumer spending) – everything is benign in the land of riskless nod until year-end bonuses are paid out.
 
We remain bullish on US Dollars and bearish on US Stocks and Bonds. Either the rest of the world won’t matter in 2011 or it will. And while hope is not an investment process, we can only hope and pray that the 45 MILLION Americans who are on food stamps this Christmas are sheltered with one of the only things left in life that the government can’t infuse with price volatility – the love of their families in times of need.
 
My immediate term support and resistance lines for the SP500 are now 1245 and 1259, respectively. I shorted the SP500 again yesterday.
 
Merry Christmas and Happy Holidays to you and your loved ones,
KM
 
Keith R. McCullough
Chief Executive Officer

 

Taxing Onions - onions


THE M3: S'PORE INFLATION

The Macau Metro Monitor, December 23rd, 2010


SINGAPORE CONSUMER PRICES JUMP

November CPI rose 3.8% YoY and 0.4% MoM. This matched the Street's expectations. The latest inflation data confirmed S'pore central bank's (MAS) expectation of 4% inflation by the end of 2010.


Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.28%
  • SHORT SIGNALS 78.51%
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