Investors are trying to keep their footing in an uncertain economic environment. Bulls are finding silver linings in a cloud of bad data. While bears are growling about the stubbornly high level of jobless claims and foreclosures and the economic headwinds they will create.
With a fragile financial system, the government has been forced to step up and be the lender and financier of last resort. And with trillions of dollars in loan guarantees and corporate capital injections as well as a $787 billion economic stimulus plan, the experts are debating…is it enough to bring us out of recession and sustain economic recovery?
On the Job Front
Jobless Claims were down this month, yet they still show labor market’s strain.
The U.S. Department of Labor released its weekly report of Initial Jobless Claims Thursday, June 11, 2009, indicating that first-time claims for state unemployment benefits fell by 24,000 to 601,000 for the week ended June 6. The 4-week average of reported jobless claims was 621,750, down 10,500 from the previous week.
Market Bulls and economists point to recent declines in jobless claims, although small, as a sign that the economy may be bottoming.
Still, the number of unemployed workers filing continuing claims sets new records weekly, rising by 110,000 to a record high 6.79 million for the week ended May 16.
On the Home Front
Existing Home Sales were up, this month, but inventories are also up due to persistently climbing foreclosures.
U.S. existing home sales for April 2009, were reported to be slightly better than expected. On a monthly basis, existing home sales rose by 2.9% month to month (m/m).
Existing single family home sales rose by 2.5%, while the sale of condo’s increased by 6.4%. Median and average prices rose in April but the supply of homes has also increased from 9.6 months of inventory to 10.2 months based on the current rate of sales. The increase in inventory shows that the U.S. housing market will continue to experience a drag in the coming months.
Of primary concern is the fact that foreclosures continue to climb as reports show that over 12% of mortgage holders nationwide are now in default on their loan or in foreclosure. This will add to the housing supply in coming months and should keep downward pressure on home prices.
Consumers represent 70% of all purchases in the U.S. economy, so the question remains, With all that downward pressure, Can consumers continue to spend?
Orders for Durable Goods were up in April, but March orders were revised sharply lower.
New orders for U.S. manufactured goods expected to last longer than 3 years, rose more than expected in April, posting their biggest gain in 16 months.
April's 1.9% increase was the biggest percentage advance since December 2007, however March orders were revised sharply lower, falling 2.1% from the previously reported 0.8% decline.
May Retail Sales were positive
The Commerce Department reported that retail sales for May rose 0.5% after falling 0.2% in April. Previously reported as a 0.4% drop, markets welcomed the positive revision.
Investors taking a negative view, site some lingering indications of weakness in the consumer discretionary data, noting that excluding gasoline, retail sales rose just 0.2% and that gasoline sales jumped 3.6% in May partially reflecting price increases, not necessarily increasing demand. Soft spots in the report included sales of electronic goods, which fell 0.5% in May after declining 0.9% the previous month.
All of these reports have something for Bulls and Bears to chew on. And while all are hopeful that we are seeing leading indicators of future growth, the experts continue to debate. Are we bouncing off of the bottom in a “V” shape? Or will we have a double dip into recession before rebounding as in a double bottom or “W”?