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Investors Need Convincing On Economy

Pick your data: stock futures drop, then rise on nonfarm payroll report. The headline number-and the initial reason futures dropped-was the was the Unemployment Rate of 9.7 percent (which is based on a telephone survey), higher than the 9.5 percent consensus.

However, the Nonfarm Payrolls report (based on data submitted by employers) was lower than expected at a loss of 216,000 (consensus 230,000), though the prior two months were revised upward.

The good news is that average hourly earnings moved up 0.3 percent, better than than 0.1 percent expected, though the increase in the minimum wage may have helped this a bit.

Elsewhere:

1) We have had better economic news for two weeks, and the stock market has gone nowhere. From the ISM numbers this week to the Case-Shiller Home Price Index, consumer confidence, durable goods, and new home sales number last week, the news for the most part has shown slow improvement.

The problem is that there is still a very persistent minority in the "double dip" camp, who believe that once the effects of stimulus wears off, the economic data will quickly flatten out, followed by very little signs of job growth.

One example: Nobel Prize winning economist Joseph Stiglitz, who in an interview with Bloomberg News this morning said that the U.S. economy faced a "significant chance" of contracting again.

This camp is already very actively arguing that the automotive industry is going to have to offer its own stimulus programs to replace the cash for clunkers program, not just here but in Europe and Japan as well.

To counter this view and to move stocks notably forward, investors will need to be convinced that the economic improvements will continue.

2) H&R Block reported a bigger-than-expected loss in its first quarter (loss of $0.39 vs. loss of $0.37). Results were hurt by a large loss in its tax services business, which came as a result of an increase in expenses incurred following a recent acquisition.

Despite the disappointing Q1 performance, the tax preparation firm reaffirms its fiscal year outlook of $1.60-$1.80 vs. $1.65 est.

3) AMR and UAL reported a modest drop in August passenger traffic (down 8.1 percent and down 5.8 percent, respectively) amid a 9 percent reduction in capacity. However, both airlines saw their passenger load factors (the percentage of seats filled per plane) rise last month from the prior year.

4) Brazilian bank Banco Santander has filed for an IPO in the U.S. and Brazil. Back in July, the bank revealed it was eyeing the sale of a 15 percent stake through a public offering.

This would value the IPO at approximately $5.6 billion. An offering of that potential size could make Banco Santander's one of the biggest IPOs of the year, and the biggest IPO in the U.S. since Visa went public in March 2008.

5) The International Monetary Fund (IMF) boosted its forecast for 2009 and 2010 world GDP. The IMF now sees world GDP contracting slightly less than expected in 2009 (down 1.3 percent vs. prior forecast of down 1.4 percent). Additionally, the IMF expects world GDP to expand 2.9 percent in 2010, up from its prior growth estimate of 2.5 percent.

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