U.S. stocks spent a little time in positive territory during the initial hour of trading on Thursday, but went negative after the news Japan was hit by another earthquake – this one a magnitude 7.1 off the coast of the Miyagi prefecture, which is north of Fukishima. 

Crude oil hit a new post-crisis high as it powered beyond $110/barrel, which probably didn’t help investor sentiment either.  And it wasn’t just crude as the CRB Index hit a new post-crisis high too, driven by the prices of coffee, sugar, and industrial metals. 

Energy, consumer staples and tech shares closed the session higher.  Utilities, industrials and financials led the other seven of the major 10 industry groups to the down side

As we covered yesterday, the Portuguese government has become the third EU country needing assistance from the EU bailout fund (European Financial Stability Fund, or EFSF).  This brings the total amount to $306 billion -- $110B for Greece, $67B for Ireland and now $128B for Portugal.  This assistance covers short-term financing needs, so if these governments fail to completely restructure their economies, and at the same time don’t find the growth to propel revenues, then investors will be the ones getting restructured via principal haircuts – which is the way it’s supposed to work in the first place. 

All of these bailouts saddle governments with even more debt and engenders a mispricing of risk.  I hope it doesn’t result in another financial meltdown in the not-too-distant future. 

Market Activity for April 7, 2011

Sector Activity for April 7, 2011

Jobless Claims

The Labor Department reported that initial jobless claims continue to hover around the 400K level, but have remained below that key mark for six out of the last seven weeks.

Initial claims fell 10,000 to 382,000 last week from a once again upwardly revised 392,000 in the prior week – that number was initially estimated at 388,000 last week. 

The four-week average fell 5,750 to 389,500.

Continuing claims also declined as both the standard issue (covering the first 26 weeks of unemployment) and emergency claims (extend out to 99 weeks) declined.  Standard continuing claims fell 9,000 to 3.723 million.  The emergency level of claims fell 91,427 to 4.271 million.

Bottom line: This is a good report.  We’d like to see initial claims fall below the 350K level to suggest that something closer to 300K/month in monthly payroll growth is upon us, but we’ll take these results.  The current level implies that the 200K/month in payroll increases we’ve seen over the past two months should continue, and just maybe the very deep problem of long-term joblessness will begin to improve as continuing claims hopefully are suggesting. 

Same Store Sales

The International Council of Shopping Centers (ICSC) reported that same-store retail sales rose 2.0% in March, beating what was likely an expected decline – there’s a not a clear cut estimate on this reading. 

This is a measure of year-over-year sales growth so the results withstood the fact that Easter will fall in April this year, while it had a March date in 2010.  The gain was driven by the luxury and wholesale club segments as apparel, department store and traditional discount segments all posted declines.

The report illustrates the tail of two consumers within the retail world right now.  Wholesale clubs (which have become the new discount over the past decade) posted a 7.2% increase, as higher gasoline prices may have pushed more middle-income consumers to value-oriented stores.  The luxury retailers reported a 7.0% increase in sales -- the segment is very connected to stock prices, specifically that psychological 10,000 mark on the Dow Industrial Average. 

Bloomberg Consumer Comfort

Bloomberg News’ gauge of consumer sentiment improved nicely in the last week as the reading rose 2.4 points to -44.5 in the week ended April 3.  While the gauge remains at a very weak level, this latest glance is a nice improvement from a couple of weeks back when the measure looked headed back to the low hit in 2009.

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Have a great weekend!

Brent Vondera, Senior Analyst

Phone: 636-449-4900