INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE

Takeaway: Tropical Storm Issac added 9k to this morning's claims print. Our expectations for tailwinds over the next six months is unchanged.

Isaac Headwinds

Initial jobless claims rose 17k last week, or 15k after revision. The Department of Labor blamed roughly half of the increase on Hurricane Isaac, noting that "Several states have reported increases in initial claims (approximately 9,000 in total) for the week ending September 8, 2012 , as a result of Tropical Storm Issac.".  

 

Where do claims go from here? We know that there's an embedded tailwind in the September through April data, so we would expect to see a significant improvement over the next six months of data, though week to week changes will remain random. We profiled this historical relationship in last week's jobless claims note: "Jobless Claims: Six Months of Tailwinds on Tap".

 

Stripping out the seasonal adjustment nonsense, jobless claims are still improving. The YoY change in non-seasonally adjusted initial claims was -8.5% this past week, a slight improvement from the -8.1% YoY change in the prior week. 

 

Additionally, the S&P and the rolling claims series diverged this week. These two series are cointegrated, meaning that they can diverge in the short term but mean revert over the longer term. For reference, the current level of claims implies an S&P level of ~1345. The S&P is currently trading at 1436, or roughly 6.7% higher than the level implied by our claims-driven fair value model. 

 

Claims: The Data

Initial claims rose 17k to 382k last week but after incorporating the upward revision to last week's data, claims rose 15k. On a rolling basis, claims rose 3.25k WoW to 375k. The NSA series fell 12k.  

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Raw2

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Rolling

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - NSA

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Rolling NSA

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - S P

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Fed

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - YoY

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Recessions

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Rolling Claims Linear

 

Yield Spreads

The 2-10 spread widened 13 bps WoW as the 10 yr treasury yield rose 16 bps. QTD, the 2-10 spread is averaging 1.34%, which is down 17 basis vs 2Q12. 

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - 2 10

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - 2 10 QOQ

 

Financial Subsector Performance

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

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Subsector Performance

 

INITIAL CLAIMS: HURRICANE ISAAC PUSHES CLAIMS HIGHER, UNDERLYING TRENDS STILL POSITIVE - Companies

 

Joshua Steiner, CFA

 e

Robert Belsky

 

Having trouble viewing the charts in this email?  Please click the link at the bottom of the note to view in your browser.  

 


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more