U.S. stock indices closed higher yesterday – well with the exception of the Dow Industrials, which was held back by the shares of IBM and Exxon – as they shook off a brief move into negative territory late in the morning session.

Energy, financials and consumer staples led the broad market higher.  Basic materials saw a little profit taking after a 12% start to the year, with health care shares also among the day’s losers.

The commodity complex, as measured by the CRB Index, lost ground for a fourth-straight session as the prices of crude and gasoline led the decline.  Crude has come under pressure after energy reports showed a big build in stockpiles, driven by the weakest demand for gasoline since the 9/11 attacks and overall fuel consumption at its slightest in more than a decade.  Its price has dropped to $95/bbl, down from $100 just a couple of days back (still very high, but we’re talking on relative terms).  Wholesale gasoline dropped to $2.86 after hitting $2.93 a week ago.

Still there are some commodities that continued to bounce back, namely the precious and industrial metals -- the former driven by expectations that central banks will remain extremely aggressive and the latter by the view that the Chinese economy isn’t going to roll over.

Still no word on that Greek default as investors and EU officials must agree on the terms of the debt swap and the haircuts on soon-to-be defunct Greek sovereigns – a necessary condition to Greece getting another round of bailout funds and also to keep the situation from triggering a CDS event.  Things don’t appear to be going well, but the fact that the Fed and ECB have been willing to go all-in the market doesn’t seem to care too much – and as I’ve been saying, they will eventually get something done.

And just out, total payrolls for January came in at +243,000 (blowing away the 140K that was expected), with private-sector payrolls up 257,000 (expected at just 160K).  This brings the three-month average to 199,000/month, up from the 155,000/month as of December – that brings the trend closer to that 300K/month we need.  The official unemployment rate fell to 8.3%, which is the lowest level since February 2009 when the rate was in the process of soaring from sub-5%.  More on this data Monday.

Market Activity for February 2, 2012

Sector Activity for February 2, 2012

Jobless Claims

The Labor Department reported that initial jobless claims fell 12,000 to 367,000 last week (beating the 371K expected) as the prior reading was revised up yet again (this occurs about 95% of the time these days), up to 379K from the 377K initial reported.

The four-week average slipped 2,000 to 375,750.

Continuing claims were mixed as the standard issue (covering first 26 weeks of joblessness) declined 130,000 to 3.437 million, while the emergency claims rose 43,200 to 3.496 million.  The previous week’s figures for both of these numbers were revised up – up 13K for standard and 40K for those emergency claims.

Overall, this is a decent report.  Continuing claims at 6.9 million remains way too high (more than twice the long-term average) and initials really should be down to at least 325K after the labor-market destruction that took place during the recession (that is, job growth and certainly continued layoffs should be much lower after that degree of mayhem).

However, with initials at 367,000 last week and the four-week average nicely below the 400K mark, with all of the challenges this economy continues to face I think we need to be relatively happy with these figures.  I’m do take the stance that initials will rise above 400K again as corporate profit growth continues to wane.  But for now, that hasn’t happened so be thankful.

Bloomberg Consumer Comfort

Bloomberg’s measure on consumer confidence – the old ABC Confidence measure and the longest-running weekly gauge on the subject – improved a touch last week to a reading of -44.8.  All three components of the measure assisted in the improvement.  Still, as the charts below illustrate, respondents to this survey are hardly in a state of “comfort.”

And the survey’s components:

State of the Economy rose to -79.1 from -81.1

Personal Finances up to -4.5 from -6.9

And the Buying Climate inched up to -50.8 from -51.3

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Have a great weekend!

Brent Vondera, Senior Analyst

Phone: 636-449-4900