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Jobless Claims, Philly Fed Can't Turn Pre-Market Around

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Thursday, May 19, 2022

The bears are still on the prowl this morning, and economic data released ahead of the opening bell isn’t impressive enough to send them back to their caves. Ahead of the data reports, the Dow was down another -324 points, the S&P 500 -39 and the Nasdaq -124 points.

Initial Jobless Claims zoomed up to their highest level in the past 12 weeks: 218K was well above the 200K expected, and a bigger margin than considered with a downwardly revised 197K the previous week. Sub-200K is a psychologically pleasing new jobless claims number, and even 218K is within range of a healthy labor market. But we’ll keep an eye on whether we continue to go up from here.

Continuing Claims set yet another new low two weeks ago (this metric reports a week in arrears from Initial Claims): 1.317 million is beneath the previous 50+-year low set the previous week of 1.342 million. When you have to go back to when Sonny & Cher were still together to find a better long-term jobless claims rate, you know you have a strong labor force. But again, we’ll see how these new claims jumping up affects longer-term claims, if at all, over time.

The Philly Fed Manufacturing Index has also set a new cycle low for the month of May: 2.6 — well off the 15.0 expected, as well as the unrevised 17.6 last month. In fact, this is the weakest productivity level for the 6th largest metropolis in the U.S. since May 2020, which was the peak lows of the pandemic. It could be worse, however: it could be a negative May read, like Empire State was earlier this month. Again, we’re looking at goods-producing, like jobless claims, wrangling their way from peak levels. Where are they headed?

After the opening bell, we’ll get new data on Existing Home Sales for April. This headline figure is expected to come down a tad, from March’s 5.77 million reported to 5.64 million last month. Since the Fed began raising interest rates this year — and especially since the last 50-basis-point bump — we have seen an almost immediate effect in mortgage rates, and we’re starting to see demand for housing a bit on the wane.

Pre-market futures have stayed where they were ahead of these new data reports: down. Big shocker, I know. Forget letting air out of the balloon, we’re now at the point of dehydrating market valuations for stocks across the investment spectrum. Let’s hope they revive before all our portfolios turn to jerky.

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