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Economic Highlights

The better-than-expected Jobless Claims numbers this morning add to the growing list of indicators that are pointing towards a strong jobs reading from the Bureau of Labor Statistics tomorrow morning. A positive labor reading tomorrow will be in-line with all recent economic data that is showing a second-half 2013 ramp up in the U.S. growth picture.

In addition to the better-than-expected Jobless Claims numbers, the Challenger survey of job-cut announcements this morning shows the December lay-offs level at the lowest since June 2000. This follows Wednesday’s ADP report that showed a strong acceleration in the pace of job gains in December. The employment components of the two ISM surveys also showed gains that follow improvements in trade balance and spending trends, both business as well as households.

All of this is prompting positive revisions to Q4 GDP estimates, which have moved up from close to +1% at the start of the quarter to almost +3% at present. The first look on Q4 GDP is a couple of weeks away, but a growth pace in the +3% vicinity will have pushed second half 2013 GDP to a pace more than double the first half’s rate. The consensus and the Fed’s view is of this second-half momentum carrying into 2014 and generating sustainable growth in excess of +3%.

This favorable turn of events is confirmatory of the Fed’s Taper call. Minutes of the December FOMC meeting shows that the Taper decision wasn’t contentious. The FOMC members didn’t see that much value in the incremental purchases, but wanted to emphasize that the support will be withdrawn in a measured and deliberate fashion.

They want to watch out for asset bubbles, and ‘several members’ apparently commented on elevated stock market P/E ratios, the high level of stock buybacks and the rise in margin debt. But the committee overall appeared to be satisfied with the cumulative improvement in the labor market since the current QE program was instituted and saw fewer downside risks to the economy’s growth trajectory in 2014 and beyond.

In corporate news, Alcoa’s (AA) report after the close today provides the ‘unofficial’ kick-off for the 2013 Q4 earnings season. Officially, the Q4 earnings season has gotten underway already, with results from 20 S&P 500 members out. All of the results that have come thus far are from companies that have fiscal quarters ending in November that get counted as part of the Q4 tally; Alcoa will be the first S&P 500 member to report that operates on the calendar quarter.

In other news, Family Dollar (FDO) missed expectations and guided lower while L Brands (LB) came out with a negative pre-announcement.

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