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Initial Claims: Very Strong

Takeaway: Our interest in claims is as a cycle-point referendum, a leading indicator on credit and lately as a harbinger of the long end of the curve.

Labor Leads the Long End of the Curve

Hurricane Sandy continues to distort the year-over-year trends in the labor market. As such, we are relying on the SA data as well as the 2-year comps on the NSA data. On both fronts, the data is very strong this week. The two-year comp shows claims down by 17.5%, which is the fastest rate of improvement in the last two months. On the seasonally-adjusted data, the headline print of 316,000 marks the third lowest print since the start of the Financial Crisis, and is only 8k shy of the low. By all accounts it would appear that the labor market continues to make steady progress in spite of the naysayers who'll tell you otherwise. Not only is an improving labor market conducive to lower credit costs for Financials, but it also exerts upward pressure on the long end of the yield curve. We showed recently just how correlated the banks are with the 10-year treasury yield, so now you've got both labor and spreads working in tandem to push bank stocks higher.

Nuts & Bolts

Prior to revision, initial jobless claims fell 7,000 to 316,000 from 323,000 week-over-week (WoW), as the prior week's number was revised up by 3,000 to 326,000.

 

The headline (unrevised) number shows claims were lower by 10,000 WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7.25k WoW to 331.75k.

 

The 4-week rolling average of non-seasonally adjusted (NSA) claims, which we normally consider a more accurate representation of the underlying labor market trend, was -13.6% lower year-over-year (YoY), which is a modest sequential slowdown versus the previous week's YoY change of -15.1%

 

Initial Claims: Very Strong - stein1

 

Initial Claims: Very Strong - stein2

 

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INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER

MACRO MEDLEY

The impact of the Government shutdown in October continues to manifest across reported, domestic macro data in November. 

 

This morning’s Durable and Capital Goods data for October reflected an expected retreat in New Orders with a slowdown across the various index aggregates while consumer confidence, universally, has remained in hangover mode through November after the discrete negative inflection into and through the latest iteration of congressional dystopia. 

 

Next week’s ISM data for November should provide a less noisy read on the trend in goods demand and manufacturing activity into year end.  Confidence data over the next six weeks, and whether we can break the current inertial downward trend, as we as we move increasingly past October's budget resolution and increasingly towards the next budget shutdown is of (obvious) import for year-end consumerism.     

 

Meanwhile, this morning’s real-time labor market data showed further strengthening as non-seasonally adjusted claims reflected steady improvement and headline claims printed its third best number since the start of the financial crisis. 

 

Below is the breakdown of this morning's claims data from the Hedgeye Financials team.  If you would like to setup a call with Josh or Jonathan or trial their research, please contact 

 

-Hedgeye Macro

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - Consumer Confidence

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - Durable Goods Oct

 

---------------------------------------------------------------------------------------------

 

Labor Leads the Long End of the Curve

Hurricane Sandy continues to distort the year-over-year trends in the labor market. As such, we are relying on the SA data as well as the 2-year comps on the NSA data. On both fronts, the data is very strong this week. The two-year comp shows claims down by 17.5%, which is the fastest rate of improvement in the last two months.

 

On the seasonally-adjusted data, the headline print of 316,000 marks the third lowest print since the start of the Financial Crisis, and is only 8k shy of the low.

 

By all accounts it would appear that the labor market continues to make steady progress in spite of the naysayers who'll tell you otherwise. Not only is an improving labor market conducive to lower credit costs for Financials, but it also exerts upward pressure on the long end of the yield curve.

 

We showed recently just how correlated the banks are with the 10-year treasury yield, so now you've got both labor and spreads working in tandem to push bank stocks higher. For more details, see our note from 11/22 "#Rates-Rising: A Current Look at Rate Sensitivity Across Financials" - please contact sales@hedgeye if you are interested in that research. 

 

Nuts & Bolts

Prior to revision, initial jobless claims fell 7k to 316k from 323k WoW, as the prior week's number was revised up by 3k to 326k.

 

The headline (unrevised) number shows claims were lower by 10k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7.25k WoW to 331.75k.

 

The 4-week rolling average of NSA claims, which we normally consider a more accurate representation of the underlying labor market trend, was -13.6% lower YoY, which is a modest sequential slowdown versus the previous week's YoY change of -15.1%

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 1

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 2

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 3

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 4

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 5

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 6

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 7

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 8

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 9

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 10

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 11

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 12

 

INITIAL CLAIMS: LABOR LEADING THE LONG END OF THE CURVE HIGHER - JS 13

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 

 



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 80.33%
  • SHORT SIGNALS 78.49%

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER

Takeaway: Our interest in claims is as a cycle-point referendum, a leading indicator on credit and lately as a harbinger of the long end of the curve.

Labor Leads the Long End of the Curve

Hurricane Sandy continues to distort the year-over-year trends in the labor market. As such, we are relying on the SA data as well as the 2-year comps on the NSA data. On both fronts, the data is very strong this week. The two-year comp shows claims down by 17.5%, which is the fastest rate of improvement in the last two months. On the seasonally-adjusted data, the headline print of 316,000 marks the third lowest print since the start of the Financial Crisis, and is only 8k shy of the low. By all accounts it would appear that the labor market continues to make steady progress in spite of the naysayers who'll tell you otherwise. Not only is an improving labor market conducive to lower credit costs for Financials, but it also exerts upward pressure on the long end of the yield curve. We showed recently just how correlated the banks are with the 10-year treasury yield, so now you've got both labor and spreads working in tandem to push bank stocks higher. For more details, see our note from 11/22 "#Rates-Rising: A Current Look at Rate Sensitivity Across Financials", a link to which can be found here.

 

Nuts & Bolts

Prior to revision, initial jobless claims fell 7k to 316k from 323k WoW, as the prior week's number was revised up by 3k to 326k.

 

The headline (unrevised) number shows claims were lower by 10k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -7.25k WoW to 331.75k.

 

The 4-week rolling average of NSA claims, which we normally consider a more accurate representation of the underlying labor market trend, was -13.6% lower YoY, which is a modest sequential slowdown versus the previous week's YoY change of -15.1%

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 1

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 2

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 3

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 4

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 5

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 6

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 7

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 8

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 9

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 10

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 11

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 12

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 13

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 19

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 14

 

Yield Spreads

The 2-10 spread rose 1 basis points WoW to 243 bps. 4Q13TD, the 2-10 spread is averaging 233 bps, which is lower by 1 bp relative to 3Q13.

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 15

 

INITIAL CLAIMS: STRONG DATA CONTINUES TO PUSH THE LONG END OF THE CURVE HIGHER - 16

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


[Podcast] McCullough: The #NOTaper Trade Is On

Hedgeye CEO Keith McCullough delivers a Thanksgiving Eve morning macro call discussing the markets and economy with particular emphasis on the US Dollar, 10-Year Treasury and Gold.

 


#NoTaper Trade? On.

Client Talking Points

US Dollar

Down Dollar. That's what you get when your centrally planned market is trying to front-run the Fed’s next move. It's officially the third down week in a row now for your Burning Buck post Janet "Mother of All Doves" Yellen's no-taper confirmation. Meanwhile, across the pond, the Euro and Pound are strong like bull versus the USD. It's sad.

UST 10YR

Bonds Yields are continuing to confuse consensus (CFTC futures/options net short position in the long bond is at year-to-date highs). But hope for a December taper is fading fast just like the US Dollar’s purchasing power. TREND support for 10-year yield is 2.64%. Keep an eye on that level.

GOLD

Question: Gold likes what?

Answer: Down Dollar + Down Rates

Yup. Gold made another higher-low yesterday (versus the June 27th closing low of $1200.67). It's up +0.75% this morning. The next line of resistance to keep an eye on is $1285/ounce. If you haven't watched it already, here's my video on Gold from yesterday.

Asset Allocation

CASH 42% US EQUITIES 8%
INTL EQUITIES 8% COMMODITIES 8%
FIXED INCOME 8% INTL CURRENCIES 26%

Top Long Ideas

Company Ticker Sector Duration
FXB

Our bullish call on the British Pound was borne out of our Q4 Macro themes call. We believe the health of a nation’s economy is reflected in its currency. We remain bullish on the regime change at the BOE, replacing Governor Mervyn King with Mark Carney. In its October meeting, the Bank of England voted unanimously (9-0) to keep rates on hold and the asset purchase program unchanged.  If we look at the GBP/USD cross, we believe the UK’s hawkish monetary and fiscal policy should appreciate the GBP, as Bernanke/Yellen continue to burn the USD via delaying the call to taper.

WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

TROW

Financials sector senior analyst Jonathan Casteleyn continues to carry T. Rowe Price as his highest-conviction long call, based on the long-range reallocation out of bonds with investors continuing to move into stocks.  T Rowe is one of the fastest growing equity asset managers and has consistently had the best performing stock funds over the past ten years.

Three for the Road

TWEET OF THE DAY

That's the problem with academics, they think they know it all and really don't want to learn. @Wesbury

QUOTE OF THE DAY

"I have no special talents. I am only passionately curious." - Albert Einstein

STAT OF THE DAY

According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.


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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

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