Will economic surprise help/hurt market?

U.S. initial jobless claims

We thought we’d shake our chart of the day up a little in a manner that fits the early reading of sentiment as stock index futures plunge. The latest weekly jobless claims data was about in-line with forecast, coming in at 302,000.

However, the prior weekly reading was massaged lower to 279,000 making it the lowest count since 2000.

In addition the four-week moving average slipped to its lowest level in eight years. That suggests that more employers are hanging on to workers in a sign of confidence that demand continues to impact the bottom line in a positive way. Earlier in the week the ADP reading of private payroll growth fell just short of its estimate, yet as we pointed out, is a third straight month above 200,000, which is very constructive. However, such “negative surprise” is reflected in the Bloomberg economic surprise index, (see chart below) which is showing signs of rolling over.

Typically, such moments in time tend to signal turning points for stock indices. That could be good news for optimists, accustomed to buying the dip of this voracious bull market, even if it does call for a little near-term disappointment.

S&P 500 futures indicate a 13.5-point opening fall while treasury yields at the 10-year are failing badly to win any friends despite the risk-off tone. That’s probably feeding the dip in stocks as investors fret about the subtle change in language apparent in the FOMC statement on Wednesday.


Chart: Claims and the Bloomberg economic surprise index.

About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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