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Jobless Claims, Durable Goods, SPX Support, and the FOMC

07/26/2012

INITIAL JOBLESS CLAIMS
 
For the week ending July 21, jobless claims declined by 35,000 to 353,000, much better than analyst estimates for 380,000.
 
•   The prior week was revised higher, from 386,000 to 388,000
•   The 4-week moving average fell to 367,250 from 376,000 (Figure  1.1)
•   Continuing claims fell by 30,000 to 3,287,000
•   This is the Federal Open Market Committee’s (FOMC) final glimpse into the labor market before next Wednesday’s meeting
  
DURABLE GOODS ORDERS
 
June Durable Goods Orders increased 1.6%, well ahead of analyst estimates of +0.3%; however, the internals of the report clearly highlight continued soft business investment and demand conditions. Overall, it is a mixed report that does not provide any evidence that Q2 GDP estimates should be raised at all. 
 
GOOD NUMBERS
•   May Durable Goods Orders were revised from +1.1% to +1.6%
      o   Civilian Aircraft bookings increased 14.3%
      o   Military Orders increased 62%
•   Capital Goods Shipped Non-Defense Ex-Air rose 1.2%
 
BAD INTERNALS
•   Durable Goods Orders Ex-Transportation declined 1.1%
•   Capital Goods Orders Non-Defense Ex-Air declined 1.4%
      o   Machinery Orders declined 1.1%
•   Computer and Communication Equipment Orders declined 4.9%
 
FOMC 
 
Next week the FOMC conducts its fifth policy meeting for 2012. Remaining on the calendar are three more meetings – September 13, October 24, and December 11. There is no post statement press conference next week, just a 2:15 p.m. release of the FOMC statement on Wednesday, August 1. Three global central banks are currently operating under monetary easing – China, the ECB, and the FOMC. Investors should continue to expect the efforts of the PBOC and ECB to be the most favorably impactful for global capital markets.  
  
S&P 500® INDEX (SPX)
 
Finally, as suggested in recent blogs, the SPX (Figure 1.2) is tracing out a neatly patterned series of higher lows that is providing investors a well-defined point of reference for further appreciation toward the SPX resistance of 1385-1390 from May 4. Continue to use 1325.41, the Thursday, July 12 intraday low, as that point of reference. This week’s challenge toward 1325.41 appears to have held support with Tuesday’s 1329.24 intraday low.
 
Figure 1.1 Initial Jobless Claims 4-Week Moving Average

Source: Bloomberg
 
Figure 1.2 S&P 500 Index (SPX) Year to Date

Source: Bloomberg

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