Thursday, April 8, 2010

4/8 Market Comment Thread

Good Morning,

First a big thanks to those who stood up and donated to the “Fire the Fed” program at, I appreciate it, thank you! Your leadership sets an example for others.

Weekly Jobless Claims jumped from 439,000 to 460,000. The consensus was for a drop to 436,000. Since it’s higher, they simply wouldn’t be doing their job if they didn’t try to explain it away…
The Labor Department is citing special calendar factors for an unexpected jump in initial jobless claims to 460,000 in the April 3 week vs. the prior week's 442,000 (revised 3,000 higher). The Labor Department is not only citing Easter as a distortion but also the Cesar Chavez holiday in California, and it is further warning that seasonal volatility will shake up the numbers through the next several weeks. Otherwise, according to Market News International, the department reports "nothing unusual."

Special factors give special importance to the four-week average which is at 450,250, up 2,250 from the end of March but down more than 20,000 from the beginning of March. How this month-to-month comparison tracks in the weeks ahead will shape expectations for the April employment report.

Continuing claims, which are lagging data for the March 27 week, fell 131,000 to 4.550 million for the lowest level of the recovery. The four-week average, down 36,000 to 4.648 million, is also the best of the recovery. The unemployment rate for insured workers slipped 1 tenth to 3.5 percent. In unadjusted data for the March 20 week, claims for emergency compensation fell by just over 300,000. The picture on the continuing claims is favorable though there is noise as the improvement in part reflects discouraged workers falling out of the insured unemployment pool.

While initial claims are down from a year ago, the number of people moving onto the Emergency rolls jumped from 2.2 million one year ago, to 5.6 million near the end of March.

Yesterday the Petroleum report showed another large build in crude oil.
A surge in imports helped drive oil stocks 2.0 million barrels higher in the April 2 week to 356.2 million. Oil imports averaged 9.6 million barrels per day for the highest reading of the year and the third 9-million-plus reading in a row. OPEC output has been increasing well beyond quotas.

In contrast to oil stocks, gasoline stocks fell 2.5 million barrels reflecting steady demand that is now, at plus 1.7 percent, showing its strongest year-on-year rate of 2010. But refineries interestingly weren't concentrating on gasoline production but on distillate production, which jumped to its highest level of the year at 4.0 million barrels per day and made for a 1.1-million-barrel build in distillate inventories. Distillate demand, like that for gasoline, is steady but is also showing its best year-on-year rate at minus 0.2 percent. The rise in distillate production raises the possibility that refineries are ramping up production in anticipation of stronger industrial demand, perhaps in line with strength in factory orders and other manufacturing data.

I think the following chart of inventories says a lot about the real economy. Note that inventories peaked at the trough in March of last year, fell, but are now obviously building again.

The city of Los Angeles announced they are closing down city government two days a week. Two countries, Thailand and Kyrgyzstan had people attempt to overthrow their respective governments in one day yesterday. None of this was mentioned in the national evening news I watched last night.

Consumer Credit took a huge plunge in February, much larger than expected. There was a $9.5 billion decrease in revolving credit, plus another $2 billion decrease in non-revolving credit.

Please use this thread for daily comments, we cover a lot more information there including current market action…