CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP

Initial Claims Climb 15k

The headline initial claims number rose 15k WoW to 424k (10k after a 4k upward revision to last week’s data).  Rolling claims fell 1.75k to 439k. On a non-seasonally-adjusted basis, reported claims rose 14k WoW.

 

It's No Coincidence That Claims Are at YTD Highs While XLF is at YTD Lows

We use claims as our primary frequency determinant in thinking about losses for the consumer book of balance sheet dependent financials. Thus, it is a critical signal that we remain right around the YTD high in rolling claims. The last time we saw such an inflection in the trend in jobless claims was summer 2010, a period in which the XLF lost roughly 20% of its value. Even with the XLF underperforming, we remain cautious given this continuing development on the jobs front. Specifically, it's our expectation that claims will, at best, stagnate post QE2's end and, at worst, rise. To this end, take a look at our fifth chart showing the overlay of jobless claims with S&P 500. The current divergence is among the widest we've seen in the last few years suggesting that either the market is due for a significant correction in the near-term or claims should fall precipitously in the next few weeks.

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - rolling

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - raw

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - nsa

 

Two relationships that we are watching closely are the tight correlation between the S&P and claims and between Fed purchases (Treasuries & MBS) and claims.  With the end of QE2 looming, to the extent that this relationship is causal, it is quite concerning. 

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - fed an

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - s p

 

Yield Curve Remains Wide

We chart the 2-10 spread as a proxy for NIM. Thus far the spread in 2Q is tracking 9 bps tighter than 1Q.  The current level of 260 bps is 3 bps tighter than last week.

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - 2 10

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - spreads QoQ

 

Financial Subsector Performance

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

 

CLAIMS REMAIN CLOSE TO YTD HIGHS, WITH QE2 END IN SIGHT AUGURING FOR A FURTHER BACKUP - perf

 

 

 

Joshua Steiner, CFA

 

Allison Kaptur


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more