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Jobless Claims Up to 286K; Philly Fed Bounces Back

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Thursday, January 20, 2022

If at first you don’t succeed, try, try again. Pre-market futures are up again this morning, but before we begin to holler from the rooftops that our near-term bearishness is indeed a thing of the past, we’re going to wait and see what happens from here. Both the Dow and the Nasdaq are +145 points at this hour, while the S&P 500 is +23. All market indexes are well off their recent highs, with the the Nasdaq currently in “correction territory.”

Initial Jobless Claims have cranked up to their highest levels in the past 12-week cycle, going back to Halloween Week: 286K. This was much higher than the 225K expected and the upwardly revised 231K the previous week, but almost 100K higher than cycle lows — and post-Covid lows, as well — reported the week after Thanksgiving, 188K. Post-holiday season numbers often carry a bit of static, complicated further with the advance of Omicron last month, so we’re not seeing this reversal as anything economically systemic.

That said, this is the week the monthly jobs reports will be pulling from for February when they are released two weeks from tomorrow, so we may see yet another month of disappointing headlines on job gains, as we have the past few months. However, we’re also seeing the unemployment rate coming down consistently month over month, so again — we’re not really looking at anything labor-force related that will have any lasting negative consequences on the U.S. economy here.

Continuing Claims also bumped up from the previous week’s headline: 1.675 million for two weeks ago (a week in arrears from Initial Claims) was higher than the 1.60 million expected, and above the revised 1.551 million from the week prior — which just so happened to be a pandemic low. In fact, weekly jobless claims numbers were among the first economic prints to reach pre-pandemic levels AND account for the Omicron variant hampering near-term workforce issues.

We also see a new Philly Fed survey for January, which gives us a look at manufacturing from the sixth-largest city in the U.S.: 23.2 is a nice rebound from the very low 15.4 posted for December, as well as an improvement over the3 expected 18.5. This headline represents the median level we’ve seen at least going back to the summer of last year, exemplified by the 15.4 low for December and the 39 posted for November. The high mark of this cycle was 50.2 back in April ’21.

After the market opens, we’ll see fresh data on Existing Home Sales, which are expected to tick up to 6.48 million seasonally adjusted, annualized units for December from 6.46 million reported for November. Just yesterday we saw strong new home formation numbers from Housing Starts and especially Building Permits; Existing Home Sales is the other side of this coin: pre-owned homes for sale. Housing formation remains on of the most valuable metrics for determining strength in the overall economy.

Will this all be enough to stop the bleeding from a rather nightmarish January trading scenario thus far? The S&P is already down 5% this year, and the Nasdaq is down twice that from its November highs. At some point, investors will not be able to resist bargain prices on some of the best-set companies for the foreseeable future; the only thing we need to figure out is when that “some point” is.

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