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JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES

Takeaway: The labor market continues to improve, and at a slightly accelerated pace as of this latest week. Expect ongoing tailwinds through February.

Back on Track

This morning's initial jobless claims number is meaningful in that it reflects two weeks of data. The previous week's numbers were estimated due to the omission of 19 states, including California and Texas, due to the holidays. 

 

Importantly, the data is reasonably strong, continuing a trend we've seen since September, adjusting for the one-time effects of Hurricane Sandy. As a reminder, we expect claims will continue to improve through February and should decline to a level in the 340-350k range on a 4-week rolling basis. Then, we would expect tailwinds to reverse to headwinds in March, as has been the case for the last three years. See the first chart below for an illustration of the trend.

 

Recall that to ferret out the noise of seasonality distortions, we look at the annual change in rolling NSA claims. Last week the NSA YOY change was -6%, which compared with -5.9% in the previous week. A larger negative number represents accelerating improvement. 

 

The Numbers

Initial jobless claims rose 12k to 372k from 360k. The prior week's number was revised up by 12k to 362k from 350k. Normally we look at the unrevised vs. unrevised for apples to apples comparisons, but this week, due to the missing states, we're comparing unrevised to revised. Rolling claims rose 0.25k WoW to 360k. 

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 1

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 2

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 3

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 4

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 5

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 6

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 7

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 8
 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 9

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 10

 

JOSHUA STEINER: INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES - 11

 

 

Joshua Steiner, CFA

 

Robert Belsky


INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES

Takeaway: The labor market continues to improve, and at a slightly accelerated pace as of this latest week. Expect ongoing tailwinds through February.

Back on Track

This morning's initial jobless claims number is meaningful in that it reflects two weeks of data. The previous week's numbers were estimated due to the omission of 19 states, including California and Texas, due to the holidays. 

 

Importantly, the data is reasonably strong, continuing a trend we've seen since September, adjusting for the one-time effects of Hurricane Sandy. As a reminder, we expect claims will continue to improve February and should decline to a level in the 340-350k range on a 4-week rolling basis. Then, we would expect tailwinds to reverse to headwinds in March, as has been the case for the last three years. See the first chart below for an illustration of the trend.

 

Recall that to ferret out the noise of seasonality distortions, we look at the annual change in rolling NSA claims. Last week the NSA YOY change was -6%, which compared with -5.9% in the previous week. A larger negative number represents accelerating improvement. 

 

The Numbers

Initial jobless claims rose 12k to 372k from 360k. The prior week's number was revised up by 12k to 362k from 350k. Normally we look at the unrevised vs. unrevised for apples to apples comparisons, but this week, due to the missing states, we're comparing unrevised to revised. Rolling claims rose 0.25k WoW to 360k. 

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - seasonality

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Rolling NSA

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Raw

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Rolling

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - NSA

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - rolling nsa 2

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - S P

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - FED

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Recessions

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - linear

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - YoY NSA

 

Yield Spreads - 4Q12 Was 6 bps Better QoQ

The 2-10 spread rose 7.4 basis points WoW to 157 bps. The fourth quarter of 2012 saw the 2-10 spread average 143 bps, which was +6 bps higher than 3Q12.

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - 2 10

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - 2 10 QoQ

 

Financial Subsector Performance

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

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Subsector performance

 

INITIAL JOBLESS CLAIMS: LABOR IMPROVEMENT ACCELERATES  - Companies

 

Joshua Steiner, CFA

 

Robert Belsky


CHART[S] DU JOUR: COTAI VS PENINSULA

Divergence continues – but only in Mass

 

  • New Cotai properties have driven considerable divergence in YoY growth in both Mass and VIP
  • However, the VIP divergence has been short-lived.  Peninsula VIP volume growth is approaching Cotai VIP volume growth despite the fact that the market will not lap the opening of Sands Cotai until April 2013
  • New properties are still driving engine behind the Mass market growing above mid teens

 

CHART[S] DU JOUR: COTAI VS PENINSULA - v

 

CHART[S] DU JOUR: COTAI VS PENINSULA - c2


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The Next Level

Client Talking Points

Grabbing The Bull By The Horns

Yesterday was one hell of a rally. The S&P 500 held its line of support at 1419 and then ripped to within 0.8% of its September 2012 intraday high (Bernanke Top, anyone?) All it took was a little deal on the fiscal cliff. No biggie. Oh yeah - The Russell 2000 closed up +2.9%, making an ALL-TIME high at 873. Keith’s multi-duration S&P sector model is blowing gaskets like a Looney Tunes clock spinning a hundred times a minute; all nine sectors are bullish on all three durations (TRADE, TREND, TAIL) for the first time since December of 2011. This is huge. Anyone who shorted yesterday’s rally got their face ripped off. 

 

So what happens next? There is a very good opportunity for the big guys - the asset managers - to move capital out of bonds and into stocks. Earning 50 basis points a year isn’t generating alpha, but participating in a full on bull rally will, provided you manage your risk. With #GrowthStabilizing, stocks on the rise and a housing market in recovery, we’re just a catalyst away from taking this market even higher.

Asset Allocation

CASH 55% US EQUITIES 18%
INTL EQUITIES 15% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 12%

Top Long Ideas

Company Ticker Sector Duration
NKE

Our competitors are neutral to bearish on the name ahead of earnings, but we think they’re missing the bigger picture. We think concerns over the shoe cycle rolling over are overdone. With R&D in the mid-teens, NKE has the ability to drive the ‘sneaker cycle’ in a case of “the tail wagging the dog”. We also think $NKE is a candidate for releasing a special dividend when they report EPS next week.

SBUX

Uncertainty in US from a macro perspective (jobless claims uptick) gives us pause from TRADE perspective although coffee prices will serve as a tailwind going forward. Company is becoming more complex, taking on risk as it acquires new brands. Longer-term, we view Starbucks, along with YUM, as one of the most attractive global growth stories in our space.

FDX

Margins are in a cycle trough as the USPS is on the brink. FDX is taking more share in the U.S. and following the recent $TNT news flow we think $UPS is in a tough spot.

Three for the Road

TWEET OF THE DAY

“Buy stocks, sell bonds” -@KeithMcCullough

QUOTE OF THE DAY

“Democracy is a device that ensures we shall be governed no better than we deserve.” -George Bernard Shaw

STAT OF THE DAY

Private Sector Employment rises more than expected, up 215,000 in December.


Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY)

Scarce transactions close out the year, though volume was better  

 

 

Upper upscale (UUP) & Luxury Transaction Trends for Q4 2012 

  • Q4 2012 worldwide hotel transaction volume (UUP & Luxury brands) was $3.2 billion, up from Q3 2012's $2.7 billion, and higher than Q4 2011's $1.3 billion. 2012 transaction volume reached almost $10 billion, lower than the $11 billion in 2011.
  • The number of US luxury/UUP hotel transactions was 9 in Q4 2012 compared with 12 in Q3 2012 and 9 in Q4 2011. 
  • The number of non-US luxury/UUP hotel transactions was 3 in Q4 2012, compared with 6 in Q3 2012 and the 11 in Q4 2011.
  • There were two portfolio deals: 1) The Government of Singapore Investment Corp. bought the Grand Wailea on Maui, the La Quinta Resort & Club and PGA West golf course in La Quinta, Calif., the Arizona Biltmore Resort & Spa in Phoenix - which are all managed by Waldorf Astoria Management under Hilton Worldwide’s Waldorf Astoria Hotels & Resorts brand - and Claremont Resort & Spa in Berkeley, CA.  The seller was a joint venture led by Paulson & Co. which had taken over the properties in a bankruptcy deal as part of a $600 million restructuring of Morgan Stanley's real estate funds.  The hotel properties then filed for Chapter 11 bankruptcy protection. 2) Host hotel's European JV bought five hotels from Whitehall - Paris Marriott Rive Gauche Hotel & Conference Center, Renaissance Amsterdam Hotel, Renaissance Paris La Defense Hotel, Renaissance Paris Vendome Hotel, and the Courtyard Paris La Defense West – Colombes. 
  • Relative to a seven quarter trailing average, US average price per key (APPK) in the UUP segment is in-line at $266k.  Non-US APPK in the UUP segment moved to $360k, 15% higher than its seven quarter trailing average. 

Other Chain Scale Trends for Q4 2012

  • There were two large M&A transactions:  1) Apple REIT 6 was sold to BRE Select Hotels Corp (a Blackstone affiliate). 2) InTown Suites was sold to Starwood Capital Group.
  • According to Fitch, the hotel delinquency rate in November was 9.83%, lower than the 10.82% seen in August.  The delinquency rate remains well below the relative high of 14% seen in Q3 2011.

Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY) - uup4

 

Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY) - l1

 

Q4 GLOBAL HOTEL TRANSACTIONS (UUP/LUXURY) - c


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – January 3, 2013


As we look at today's setup for the S&P 500, the range is 45 points or 2.29% downside to 1429 and 0.79% upside to 1474.              

                                                                                                                 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.58 from 1.58
  • VIX closed at 14.68 1 day percent change of -18.53%
  • ECONOMIC DATA – the 3 big engines for Global #GrowthStabilizing (China, Germany, USA) all better sequentially in the last 24hrs (US PMI 50.7 DEC vs 49.5 NOV, w/ a very good employment reading within that report of 52.7; German unemployment 6.9% was solid; and Chinese non-manufacturing PMI of 56.1 DEC vs 55.6 NOV hit a 4mth high).

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, week of Dec. 28
  • 7:30am: Challenger Job Cuts, Y/y, Dec., (prior 34.4%)
  • 8:00am: RBC Consumer Outlook, Jan. (prior 46.9)
  • 8:15am: ADP Employment Change, Dec., est. 140k (prior 118k)
  • 8:30am: Initial Jobless Claims, wk of Dec. 29, est. 360k (prior 350k)
  • 9:45am: Bloomberg Consumer Comfort, wk of Dec. 30 (prior -32.1)
  • 9:45am: ISM New York, Dec. (prior 52.5)
  • 10am: Freddie Mac mortgage rate survey
  • 2pm: Fed releases minutes from Dec. 11-12 FOMC meeting
  • 4:30pm: API weekly inventories
  • U.S. Treasury to announce 1Y, 3Y, 10Y, 30Y auction sizes

GOVERNMENT:

    • Congress convenes; almost 100 members will be sworn in to office for the first time
    • Centers for Medicare & Medicaid Services holds a conference call briefing on an announcement related to the Affordable Care Act, 1:30pm
    • American Bankers Association announces the release of the third quarter 2012 Consumer Credit Delinquency Bulletin, containing delinquency data for several consumer loan categories, 4pm

WHAT TO WATCH

  • Google said to be set to end FTC antitrust probe with agreement today
  • Boehner set to regain speakership as party base decries tax vote
  • Sandy aid will get vote this month following delay, Boehner says
  • Retailers may post slowest Dec. sales growth since 2008
  • Ford, GM, other automakers release December sales
  • Barnes & Noble releases holiday sales, Nook update
  • AMR asks bankruptcy judge to approve revised supplier contracts
  • China service industries expanded at fastest pace in 4 mos. in Dec.
  • Paulson & Co. named as defendant in amended ACA Goldman Sachs lawsuit
  • Al Gore’s Current TV is said to be sold for $500m to Al Jazeera
  • Rambus barred from enforcing 12 chip patents in Micron lawsuit
  • Amgen whistle-blower blocked from challenging Aranesp settlement
  • Safeway CEO Burd to retire after 20 yrs

     EARNINGS:

    • Family Dollar (FDO) 7am, $0.75
    • UniFirst (UNF) 8am, $1.33
    • Worthington Industries (WOR) 8:30am, $0.41
    • Progress Software (PRGS) 4:30pm, $0.34

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

GOLD – both bonds and gold do not like growth improving; that’s why both lagged yesterday and don’t look any better today (10yr 1.83% and Gold fails at $1690 TRADE line resistance); Gold snapping its long-term TAIL line again of $1671 is when you get paid there on the short side. A better employment rpt could easily do that.

  • Oil Drops From Highest in Three Months on Signs Gains Excessive
  • Dust Bowl Wilting U.S. Wheat as Funds Turn Bearish: Commodities
  • Gold Declines on U.S. Budget-Deal ‘Hangover’ as Dollar Rallies
  • Copper Advances on Prospects for an Economic Rebound in China
  • Soybeans Drop as Prospects Improve for South American Crops
  • Australia Swelters Amid Most Wide-Ranging Heatwave Since 2001
  • Gold Seen Sliding to $1,450 in 2013 on Investor Frustration
  • Natural Gas 4Q Price Gains Boost Producers, Challenge Suppliers
  • Coal’s Competitive Fuel Cost Advantage Over Gas Grows in 4Q
  • Chavez Cancer Imperils $7 Billion Caribbean Oil Funding: Energy
  • Rig Grounding Revives Debate Over Shell’s Arctic Oil Exploration
  • Asia Naphtha Crack Rebounds; Vitol Sells Gasoline: Oil Products
  • European Union Carbon-Dioxide Permits Decline to One-Month Low
  • Gold’s 12-Year Bull Market “Not Yet Dead,” Credit Suisse Says

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


EURO – biggest relative opportunity on the long-side potentially here this morning w/ EUR/USD moving to immediate-term TRADE oversold at $1.31 (risk range = 1.31-1.33). At a bare minimum, if you are short it, you cover here – we might buy it (which is just one more bullish signal for global macro beta right now). Haven’t bought the Euro in a while.

 

THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

The Hedgeye Macro Team

 

 

 


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