The Banking and Strategy Initiative

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US Economy: Roughing up on Bad news Thursday

The day before the BLS Jobs report, everything is looking black and blue for the US economy with the Dollar index at 83 and courtesy the Euro still climbing inordinately at 83, while that has kept commodities tired, it also means that the Jobless claims are well into the 400k territory, the moving average for the last 4 weeks moving up significantly on the 384k number today and the Dow Jones/S&P 500 tanking by1.5% yesterday and another 1% at the open today , S&P close to going below the 1300 mark.  A Dow below 12k looks likely from here as the Day’s 4 or 5 reports all slammed into the fledgling Economy. As expected the US Q1 GDP number was revised to below 2% on cutdowns in estimates of Consumption expenditure (PCE), inventories and government expenditure, while imports hacked up the score.  Q4 results of 3% thus at this time seem a bit far away but things will likely remain the same in the second half of this year with retail sales still managing the 3% mark.

Natural Gas starts another new move up in the new month globally even as the expected oversupply has not materialised yet and Power plants have switched to a 60 Gas 40 Coal mix in most US utilities. The Corporate Profits report was a optimistic one with $1.67 T in profits over $1.45 T last quarter.

However on the Jobs report prospects, both the Challenger Job cuts report with 62k job cuts and the ADP employment report with 133k over a 119k in April continue a trend for the almost bad BLS Employment report to continue. however the challenger report includes 27k layoffs from Hewlett Packard this week and thus, that will not become part of the Friday Report.

To make things worse the Chicago PMI we have followe dwith interesst finally seemed to give up the challenge continuing down from 60+ two months ago to 56.2 in April and now 52.7 with even New Orders trending down as inventories have never really ramped up nationally. However seemingly, the Chicago PMI was mostly constrained by the continuing contraction in Backlog and the sub indices on Jobs are fairly positive.

Meanwhile Capitol Hill is ready to take Dimon speak for a few hours as he testifies on the $2 B loss reported on May 10. Don’t get troubled by the latest ‘twist’ as accounting methods differ between CIO and Investment Bank regularly and pricing for illiquid derivatives has long been a bone of contention.  Bu then Jaim Dion should be able to clear up that one too!

 

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