Release: Jobless Claims (Week Ended Dec 23rd)
Consensus Forecast: 372K
Date/Time: 12/30/11 8:30AM ET (13:30 GMT)
Jobless to Remain Below 400K, A Positive Sign for NFP
first up in tomorrow's session will be our latest weekly reading on new jobless claims. This indicator has certainly moved in a positive direction of late falling and staying below the 400 K level positive signs of labor market. Expectation is that for the week ending December 23th jobless claims rose by a round 8K to 372K from the previous reading of 364K.
While a setback the key here is that claims remain to print below the 400K level as that is historically the level at which non-farm payrolls print more jobs than needed to keep up with new entrants into the labor force.
While not superb the last five months have seen non-farm payrolls coming in at around 120K - also consistent with a level needed to absorb those new to the labor force. While a larger figure is needed in payrolls to meaningfully bring down the unemployment rate, if the US continues to see the trend of firings falling then that bodes well for the labor market.
Recent consumer confidence reports - both from the Conference Board as well as the University of Michigan - have shown that consumers feel more optimistic about the labor market with the internals of the Conference Board index showing those consumers feeling that jobs are plentiful at the best level since January 2009. Therefore, if jobless claims come in better-than-expected (that is smaller than forecast) that will continue the trend we see in the above chart which shows improvement. However, a worse than expected reading could undermine expectations for December's non-farm payroll which is set to be released next Friday.
Release: Chicago PMI (December)
Consensus Forecast: 60.4
Date/Time: 12/30/11 9:45AM ET (14:45 GMT)
The Chicago PMI is significant because it tends to track the national ISM manufacturing index quite closely and therefore is a good leading indicator for that more important release. The manufacturing PMI came in at 52.7 for November (not pictured the below graph).
In November the Chicago PMI rose to 62.6 the best reading since April, but the expectation is for the index to fall back down to 60.4 according to the consensus forecast. That still it shows a strong pickup in activity as the 50 level separates expansion from contraction though would mean a slower pace of growth.
therefore the data tomorrow will give us a good indication of how national manufacturing performed though that read these does not come out till next Tuesday. The better-than-expected report would signify that they US economy which has seen better data of late continues to show some momentum and can help stocks to rebound from the falls we saw in Wednesday's session. That could help to bolster higher-yielding and commodity and growth linked currencies at the expense of the USD.
Release: Pending Home Sales m/m (December)
Consensus Forecast: 1.7%
Date/Time: 12/30/11 10:00AM ET (15:00 GMT)
The final report tomorrow from the US we get a look at pending home sales which are expected to show a 1.7% increase in November following it's and .4% rise in October. The pending home sales is tricky because the measure is taken prior to the closing and many deals can fall through if the buyer cannot find financing from a bank for instance. it is also released by the National Association of Realtors which had its credibility taken down several notches when it admitted overstating existing home sales by 15% over the last five years this month.
The data from the US housing market has been mixed as housing starts climbed to a one half year high but existing home sales released last week came in sharply below expectations along with a sharp downward revisions the previous month. Therefore out of the three releases for Thursday existing home sales may carry the least about weight.
Was Wednesday's Risk Aversion Move Towards USD an Overreaction?
In Wednesday's session we saw a heavy move towards the USD as there were several stories coming together to push the market around in thin liquidity conditions. Year-end flows and the need for companies to have USD, blustering between Iran and the US, and the release by the ECB showing its balance sheet at a record high conspired to give a very risk off tone to the session. The S&P 500 fell to the 1243 area and gold sold off almost $45 from its open.
Therefore, we want to see if the move towards risk aversion continues and overwhelms any reaction from US data or if the theme of the US recovery that has some momentum can create the conditions for a pullback to the trading we saw on Wednesday. We would need to see better-than-expected jobless claims and Chicago PMI for that to happen. If we have data coming in as expected, it doesn't bode well for risk as it would mean a slowdown in activity and a pick-up in firings and could mean an extension of the risk-off theme.