I said Wednesday the chances of a Fed rate hike in June were extremely small, and I still believe that. But the very low initial claims report for this week (262,000 vs. 290,000 expected) may be a sign that March's low nonfarm payroll report will be revised upward—which is certainly a requirement for the Fed to even consider a hike.
The Employment Cost Index, which measures the cost of labor for businesses, was up 0.7 percent quarter over quarter, better than an expected 0.6 percent increase. It rose 2.6 percent year-over-year, another sign of modest wage pressures. The dollar strengthened, and the 10-year Treasury yields rose on the news.
Elsewhere:
1) Energy has turned from loser to winner, while healthcare is flat. Energy, which was the loser for the year going into April, has turned into one of the gainers as oil went from $48 to $59 a barrel. Healthcare was the big gainer going into April, but a volatile month for biotech combined with some real down moves in other sectors. The iShares Nasdaq Biotechnology ETF is flat.
Sectors in April
- Energy: up 7 percent
- Tech: up 3.9 percent
- Materials: up 3.9 percent
- Industrials: up 0.8 percent
- Healthcare: flat
Indeed it's not biotech that investors should be looking at; the bloom is off the rose for many sub-sectors of healthcare, including pharmacy benefits managers like CVS Health (down 2.3 percent for the month), HMOs like Health Net (down 11 percent), managed Medicaid providers like Molina (down 11 percent), and device makers like Medtronic (down 2.9 percent)
Much of this seems to be simple de-risking toward the end of the month. Healthcare as a group was the big winner this year and was a very long trade.
2) ConocoPhillips and big oil: Is this the trough quarter? ConocoPhillips reported a loss of 18 cents, close to expectations, which is awful, but there's a good chance this is the bottom. The supermajor will likely lose money next quarter, but consensus is only for a loss of 4 cents.
To give you an idea of how wild these earnings swings are, look at the numbers:
ConocoPhillips Earnings
- 2013: $5.70
- 2014: $5.30
- 2015: $0.47 (est.)
- 2106: $2.79 (est.)
From $5.30 to 47 cents. In one year. That is quite a drop for a company with $55 billion in sales in 2014, even if revenue drops to $40 billion in 2015.
ConocoPhillips reiterated it was on track to meet its target of two to three percent production growth in 2015 from continuing operations, excluding Libya.