Market Insider

Market Outlook: Jobless Claims Top Barrage of Economic News

Weekly jobless claims top the list of economic reports Thursday for the few traders who haven't yet taken off for the holidays.

Bryce Duffy | Stone | Getty Images

“It’s a data barrage in this really thin and lightly populated market," said Ward McCarthy, chief financial economist at Jefferies. "There doesn’t seem to be a whole lot of incentive for anyone to take on risk, duration risk or otherwise, and I suspect that whatever data we get will be used as an excuse to lighten positions in everything."

Weekly claims and the final look at third-quarter GDP are reported at 8:30 a.m. EST. There is also the Chicago Fed national activity index.

At 9:55 a.m. EST, the consumer sentiment survey is released and at 10 a.m. FHFA home prices and November leading indicators are reported.

“The claims are important because this is the claims for the survey for the December employment data," McCarthy said. "We’re looking for it to back up from 366,000 to 385,000, but the claims numbers have been telling a pretty consistent story, and that is that labor market conditions are improving.” 

Last week’s claims report of 366,000was the lowest reading since May 2008 and an encouraging sign to economists, who see a slight improvement in the hiring picture. The consensus for Thursday’s claims report is 380,000.

Besides data, investors will be watching for comments from European Central Bank President Mario Draghi, who speaks at 11 a.m.

Markets are also watching the political feuding in Washington over the extension to thepayroll tax cut, which lacks support among House Republicans but passed the Senate.

The lack of agreement and finger pointing reminds analysts of the acrimonious environment around the debt ceiling debate last summer. But so far, markets have not had a big reaction.

“It’s so difficult to say the market is moving on any broader perspective,” said CRT Capital chief Treasury strategist David Ader . “People are not taking positions in here. The mere fact that 10-year notes, with 3.5 percent GDP, are under 2 percent in yields , for example, kind of tells you that it is paying attention” to Congress.

“The reality is Congress is not going to do anything, and the Fed is not going to do anything to spur the economy so we in the marketplace have to sit and wait and see how the data pans out and how Europe pans out,” Ader said.

He said the impact will be felt later, as the payroll tax cut would amount to about 0.5 percent of GDP though some economists put it at a higher 1 percent.

McCarthy said investors are tired of the bickering.

“I pay close attention to this stuff, and these guys are wearing me out," he said. "I think they are wearing out everybody actually. All parties involved claim they want a 12-month extension, but somehow they can’t agree on that. Quite frankly in my outlook for next year, I said I thought the political environment in Washington was the biggest risk to the economy, and they’re proving me right — on par with Europe.”

Click to see what other risks could be lurking for markets in 2012.

Stocks meandered Wednesday, with the Dow finishing up 4 points at 11,999 and the S&P up 2 points at 1243. The Nasdaq was 25 lower at 2,577 on a big decline in tech stocks after Oracle’s disappointing earnings comment. The 10-year Treasury was yielding 1.97 percent.

Oil rose1.4 percent to $98.67 per barrel, after the Department of Energy reported a surprising drop in crude stocks. The drop of 10.6 million barrels to 323.6 million barrels came as oil companies drew down inventories for yearend accounting purposes, but the decline was the largest in a decade, according to Reuters.

Europe set the tone for markets early Wednesday, with early moves in lockstep with the euro. The euro nearly reached 1.32 after the European Central Bank announced that banks had tapped it for $489.2 billion euros in its three-year program. But it later fell to a level just above 1.30.

“The euro rallied and made a 7-day high just before the announcement,” said Marc Chandler, chief currency strategist at Brown Brothers Harriman.

Chandler said the euro’s move was a case of “buy the rumor, sell the fact.”

Miller Tabak market strategist Peter Boockvar was watching the banking sector Wednesday. The KBW bank index closed up 1 percent.

“At least U.S. banks can breathe a sigh of relief that European banks have enough funding, now after the ECB news,” he said.

He said he’s now watching for more news like the cautious earnings guidance from Oracle Tuesday.

“We’re going to deal with more Oracles," he said. "More Emerson Electrics. More Duponts. We’re unfortunately going to see the collateral damage that’s being done to the global economy and it’s going to be a headwind."

"There is still some belief that the U.S. can skate by” as Europe edges toward recession, he said.

Boockvar said it is unclear whether stocks can muster a year-end Santa rally in the final days of the year, something analysts had once been expecting. The market, he said is in a “technical no man’s land.”

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