Full circle: Joblessness at 2008 level
Recapping the day's news and newsmakers through the lens of CNBC.
Stocks soar as jobless claims and layoffs fall
There are surprises, and then there are Surprises, capital S. Put today's jobless claims in the second category—good enough to spark a surge in U.S. stocks that lifted the S&P 500 above 1,700 for the first time.
The Labor Department reported that the number of people filing new unemployment claims fell to a five-and-a-half year low last week, suggesting that the labor market really is improving.
Initial claims dropped by 19,000 to a seasonally adjusted level of 326,000, while economists had forecast 345,000. The claims figure was the lowest since January 2008.
July figures are notoriously volatile, because auto plants often shut down for retooling. But, perhaps because auto sales are so strong, it looks like carmakers have shortened the retooling time or skipped it. That could throw off the government's seasonal adjustments. At any rate, manufacturing seems to be strong. A report from The Institute of Supply Management said its index of manufacturing activity rose in July to its highest level in two years.
Also today, a report from Challenger Gray & Christmas said that employers have announced 296,633 layoffs this year through July, down from 319,946 in the same period last year. At the current pace, layoffs this year could come in below the 2012 level, which was the lowest since 1997.
"There is no doubt as we look at this [unemployment] number it is good news. There is no doubt as you look at Challenger's layoffs moderating, it is good news."
—CNBC's Rick Santelli
"We have not seen a number like 326,000 since before the recession. ... There is some hope in this number. ... All of the job data is pointing toward relative strength."
—CNBC's Steve Liesman
"The rising asset prices will help instill confidence and that will breed more confidence."
—Matthew Kaufler, portfolio manager of Federated Investors' Clover Value Fund
Despite improving economy, Exxon and Shell stumble
It ain't easy being a big oil company. Environmentalists loathe you, governments hound you, and when earnings season comes around, investors often join in the Big Oil bashing chorus. Take today. On a day of generally good economic news, two mammoth producers disappointed investors.
Exxon Mobil shares traded down after reporting a 57 percent drop in net income for the second quarter. The culprit: weaker refining results and lower production. Granted, the year-earlier period was hard to beat because of a healthy gain from the sale of a lubricants division. But even accounting for that, results were awful, with income down 19 percent.
Analysts had expected Exxon to earn $1.90 a share; it reported $1.55.
Royal Dutch Shell also reported a 57 percent drop in second-quarter net earnings, but for entirely different reasons: attacks on its operations in Nigeria and a writedown of the value of its shale oil and gas fields in North America.
Shell said it had abandoned its long-term production targets as secondary to financial goals.
"[Exxon Mobil is] spending a fortune trying to find oil, and they're not doing it. But it doesn't matter because this company spends so much money buying stock back. ... I think Exxon Mobil, when it comes out in the wash, will be fine."
—CNBC's Jim Cramer
"I think the key there is to really solve sabotage, and it has to be a multistakeholder approach, led by the Nigerian government. In the long term, Nigeria is an important resource, and we hope that we can sort out some of the short to medium-term sabotage and environmental issues."
—Shell CEO Peter Voser
Bonds look good, or maybe not
Oh, the games people play! Back in the bad old days of, say, 2007 or 2008, the bond ratings firms were accused of overly rosy views of mortgage-backed securities. Downplaying risks was believed to have played a major role in the financial crisis.
Once bitten, twice shy, right?
Maybe not. New research contends that Standard & Poor's is a more "friendly" rating agency than peers and is benefiting from its rosy view of the world.
Though S&P has long denied any bias and questions the methodology of the research, the work by Commercial Mortgage Alert says a given mortgage-backed security is likely to get a higher rating from S&P than from other agencies. As a result, S&P is grabbing a bigger share of the market.
"The general consensus was that these changes have let them get their market share back."
—Amherst Securities bond analyst Darrell Wheeler
Since no day is complete without chewing over tapering, here's today's morsel: Pimco CEO Mohamed El-Erian says economic growth will not be strong enough to justify trimming the Federal Reserve's bond-buying program.
But he expects the Fed to cut the program anyway, because of concerns about the cost and risk of continuing to buy $85 billion in bonds a month.
Many experts expect the Fed to cut monthly bond purchases to $60 billion or so as early as September, and to phase the program out by next spring.
"We're not seeing it yet in the economic data, but the hope the Fed has is the longer it waits, the better the data will become. That is a hope as opposed to a very high probability."
—Pimco CEO Mohamed El-Erian
—By Jeff Brown, Special to CNBC.com