Thursday, September 10, 2009

Morning Update/ Market Thread 9/10

Good Morning,

Equity futures are down slightly, but came back from a deeper hole following the latest weekly employment report:

We’re to the point that something is going to have to give – it’s either sacrifice the dollar by sending stocks higher, or let stocks slide to save the dollar. The dollar is sitting right on the bottom boundary of that descending wedge as it has been for the past 3 days. It’s been climbing out, but then diving back. The longer it stays down near that 77 range, the more likely it is to eventually break down. Bonds are slightly higher, moving the opposite direction of what is the normal relationship with the morning move higher in equities, move lower in the dollar. Gold is making a pretty clear down channel and is about $991 right now.

The trade data came out with a wider than forecast trade deficit. Both exports and imports gained a little, but when you look at the year over year figures, the monthly move is just noise, it is still a collapse of historic proportions with imports down more than 30%, and exports down more than 20%. Note Econoday does not talk about those figures, they only talk about the month over month noise because it was “positive” if you like being indebted to the rest of the world:
The U.S. trade deficit in July worsened significantly and oil had little to do with it. Businesses appear to be gambling on recovery actually happening as nonoil imports spiked. The overall U.S. trade gap worsened to $32.0 billion from a revised $27.5 billion gap in June. The latest deficit was notably more negative than the consensus estimate for $28.0 billion in red ink. The good news is that exports posted a gain of 2.2 percent after a 2.1 percent increase in June. However, imports jumped 4.7 percent after a 2.5 percent rise in June. The worsening in the trade deficit was due to a wider nonpetroleum goods deficit which grew to $23.5 billion from $19.8 billion the previous month. Import gains were widespread but led by autos and consumer goods. The jump in auto imports likely was related to the cash-for-clunkers program. The petroleum gap grew to $17.9 billion from $17.3 billion the previous month.

Today's trade report showed a spike in the trade deficit partly due to cash-for-clunks but businesses still anticipant demand to be up for consumer goods excluding autos and for capital equipment. And manufacturing is getting a boost from exports. Overall, the trade sector is warming up a bit and that is good news.

Jobless claims came in at a NASTY 550,000. That is a drop of 26k from the week prior. Econoday notes that continuing claims are down, but they fail to mention that it is solely due to people losing benefits and falling off the unemployment roles. People can’t continue to file when their benefits run out and they are not counted.
First-time jobless claims fell a substantial 26,000 in the Sept. 5 week to a lower-than-expected level of 550,000 (prior week revised from 570,000). Aside from adjustment-related volatility during the summer auto shutdowns, the latest level is the lowest since the very beginning of the year. But one week isn't enough to pull the four-week average down much, at 570,000 vs. 572,750 in the prior week.

Fewer are also drawing continuing benefits with continuing claims down a sizable 159,000 to 6.088 million in data for the Aug. 29 week and the lowest level since April. The unemployment rate for insured workers fell 1 tenth to 4.6 percent.

Equities and commodities both popped higher in immediate reaction to today's 8:30 ET data that included trade data which show strength in U.S. exports. The jobless claims report certainly indicates improvement and points to continued month-to-month easing in payroll losses.

As the Fed updates the trade data I’ll dig out their charts and present them.

The 60 minute stochastics are just rolling over from overbought, I would not be surprised by a pullback in here, watch the pivot points, 1,018 is support, 1,041 is the pivot above but the 1,030 area is heavy resistance. The dollar is on the verge, a break below 77 could be violent, but it could also be a fake in today’s pushbutton Goldman controlled markets.