We start the day with data from the Labor Department as it released its initial jobless claims for the week ending April 26 showing that 380,000 people filed for first time financial aids compared to the expected 363K while the previous reading was revised up to 345K from 342K.
Contradicting the news from the ADP yesterday showing that 10,000 private-sector jobs have been added to the market, market players are now watching closely waiting for the Jabs report tomorrow to provide a clear path for the US economy and perhaps a better picture of what the next rate decision will be.
The dollar has been gaining recently on speculations that all will be well in the US economy but after yesterday's FOMC meeting, the Feds left more doors open for further rate cuts causing a drawback in the greenback against other majors.
Inflation crawled up in March offsetting the gains in personal income as consumer prices and income both rose 0.3 percent in March. Prices were pushed higher by non durable goods and services such as food and energy while core prices rose 0.2 percent slightly above the expected and previous readings of 0.1 percent. On an annual basis, core PCE inched up to 2.1% from 2.0% just above the 2.0 percent comfortable zone set by the Federal Reserve.
Youâ€™d think that by the Feds noticing that inflation is inclining they should be at the very least neutral and watching from the sidelines but no they decided to cut rates for the seventh consecutive time yesterday.
Concerning spending, consumer spending rose 0.4% in March from Februarys 0.1 percent rise and above market expectations of a rise by 0.2%. The quarterly personal income report released earlier also showed that consumer spending has gained at the slowest pace in seven years in the first three months of the year.
A closer detailed look at the report reveals that real spending on durable goods dropped 0.5% while spending on nondurable goods inclined 0.2% marking the biggest gain in five months. Spending on services increased 0.2%. Unfortunately, spending is inclining at a faster rate than income is and therefore the personal savings rate has fallen to 0.2% of the disposable income which this month remained unchanged.
Incomes from salaries and wages rose 0.4 percent in March as income from asset and transfer payments rose 0.2% and 0.5% respectively. On the other hand, income from small businesses dropped 0.5% marking the third decline in four months while income from rents fell 1.2%.
Markets reaction was mixed as investors decided to get rid of all dangerous assets and buy back the yen showing slight unwinding of carry trades in the markets. With all the uncertainty in the markets who would blame them? The direction of all majors is yet to be clearly determined.
In stock markets, stock futures reversed prior gains as the data concerning the jobless claims and personal spending came in weaker than expected. The Dow Jones Industrial Average fell 2 points to 12,805.00 despite the gain of 0.40 points in the S&P 500 to 1,386.40 and the 3.75 point rise in Nasdaq 100 futures to 1,927.00.
In a different report, the Institute of Supply Management releases its manufacturing reading for the month of April showing no change from the previous month as it came in at 48.6 where expectations for a slide to 48.0.
With a reading less than 50, the manufacturing sector contracted for the third straight month in April. Looking at the sub indices, the employment sub-index fell to 45.4 from 49.2 adding more pressure to the fact that the Non-farm payrolls might show a dreadful reading tomorrow. As for inflation, the prices index rose to 84.5 from 83.5 while inventories leaped to 48.1 from 44.9 indicating that production next month might slowdown unless demand by consumers picks up.
The big day remains tomorrow as so farâ€¦the score is 2 to 1 in favor for a bad reading in the Jobs report tomorrow. But if we look at the past five months, the ADP wasn't such a good indicator and therefore I believe its 2 to NONE!!!