Each economic report recently is like another brush stroke in the portrait of a slowing economy.
Weekly jobless claims will again be a big event for Thursday's markets, and economists think the number will not really show any improvement. Wednesday's durable goods and Fed beige book report on the economy both disappointed the market. The beige book commentary, however, was not unexpected since the Fed downgraded its economic forecast.
"The tan book painted a black picture," said Art Cashin, director of floor operations at UBS. "If you put the minute-by-minute chart up, you could see the sell off accelerate at 2 p.m. The economic activity was flat in Cleveland and Kansas, and in Chicago and Atlanta, things actually slowed. It clearly underscored that the economy remains weak and also underscores what Bernanke said."
Yet, while the stock market sold off Wednesday, its decline was shallow as investors worked through the dual story of good earnings news and the idea that the economy has hit a soft patch. Many economists see slower growth in the second half, but most do not expect a double dip.
The Dow Wednesday was down 39 at 10,497, while the S&P 500 was down 7 at 1106. So far in July, the Dow is up 7.4 percent and the S&P is up 7.3 percent, the best monthly performance in a year.
Over the past 60 years, the S&P has been higher 53 percent of the time in July, for an average gain of 4 percent. In years the S&P has had a July gain, it has followed up with an August gain 56 percent of the time.
In the bond market Wednesday, the 10-year gained but its yield held just above 3 percent, a positive sign to stock traders who saw a sub-3 percent yield as a warning sign on the economy. The 2-year Wednesday also saw buying, which lowered its yield to 0.625 percent. The dollar was slightly weaker against the euro, at $1.2986.
Treasury prices also rose after the auction of $37 billion in 5-year notes was well bid, with a yield of 1.796 percent. The 5-year was yielding 1.71 percent, at the end of the day. There are $29 billion in 7-year notes at auction at 1 p.m. Thursday.
What to Watch
Thursday's early morning earnings news includes Exxon Mobil , Royal Dutch Shell , Sanofi-Aventis , Siemens, Apache, Avon Products, Barrick Gold, Colgate-Palmolive, Dr. Pepper Snapple, Moody's, CME Group, Interpublic, Kellogg, Potash, Celanese, Williams Cos, Waste Management, Southwest Air, Noble Energy, Goodrich and Northrop Grumman . ASA, Taiwan Semiconductor, and Sony also report overnight New York time.
After the bell Thursday, Amgen , Expedia, MetLife, McAfee, Genworth and Maxim Integrated report.
The stream of earnings news continues to be strong, now that 49 percent of the S&P 500 companies have reported. Earnings have risen an average 42 percent, and 77 percent of the companies have beaten earnings estimates. Sixty-four percent have beaten revenue estimates.
"Jobless claims are a real flip of the coin. There are some people who think they could flip up again, and that would hurt the market," said Cashin.
J.P. Morgan economist Michael Feroli said he expects claims to be about the same as last week's 464,000, which were slightly elevated from the week earlier.
"You're still in that goofy period of the year where the seasonals are very strong, and on top of that you have some changed patterns of motor vehicle (plant) shutdowns and so forth, so it's going to be problematic. I think it will be unchanged but more likely up than down, just because the seasonal is very aggressive, and I would guess it's not getting realized. It's kind of a technical story," he said.
Feroli said he will also be watching Kansas City Fed's Manufacturing survey, due at 11 a.m. Increasingly, economists are looking at the regional surveys for clues on the economy, as the once better-than-expected string of data turned to disappointments.
Durable goods orders for June showed a decline of 1 percent, worse than expected. "I thought durables was not as bad as the headline, but not great. It's like the core capital orders and shipments were both up, and that's good, but they weren't up much, particularly given that in June that should be up more. Also the fact that inventories were strong is not encouraging, and you have to pay back for it in the third quarter" he said.
The stronger inventories would push up second quarter GDP slightly, by about 0.2 to 0.3 percent, he said. Feroli expects to raise his number to about 2.8 percent for the second quarter, which is released Friday.
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