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Ahead of Wall Street

Thursday, October 6, 2016

If you look at the long-term chart on U.S. Initial Jobless Claims, you’ll see — not unlike many long-term economic metrics — it goes up and down in relatively consistent ebbs and flows. With that in mind, this morning’s claims data punctured lower than 250K for the first time not since 2007-08 (the last ebb), not since the early Oughts (the ebb before that), not since 1989, but since the early 1970s — 40+ years ago.

Initial Jobless Claims reached 249K in the past week, down 5K from the unchanged previous week of 254K. Continuing claims fell to 2.058 million from 2.064 million. These are exceptionally good numbers for the U.S. labor force from an historic perspective. Sure, looking at 250K as some sort of threshold is primarily psychological, but considering we were seeing jobless claims spiking up over 600K during the depths of the Great Recession, we’ve certainly come a long way.

Not that this is doing the pre-market any favors — as we’ve seen consistently throughout 2016 and in spots prior, good news in economic data often means bad news for market participants in that it increases the possibility the Fed will raise interest rates. Never mind that the Fed has yet to raise rates thus far this year, the threat of doing so sends market indices into the red.

Looking Toward Friday's Jobs Report

Tomorrow is the all-important Bureau of Labor Statistics (BLS) non-farm payroll report, documenting private and public sector job additions of the previous month, as well as overall unemployment reads. Currently, analysts expect 170K new jobs to have been created in September, with unemployment remaining steady at 4.9%.

With historic lows being reached in weekly jobless claims, it would stand to reason that we should see positive numbers by this time tomorrow morning. What’s less certain is if market futures will continue to sell off in response to a favorable U.S. labor market.

It’s fairly certain the Federal Open Market Committee (FOMC, which decides U.S. interest rates) will not make a move less than a week before the presidential election, which is the next time the committee meets. Smart money is on a rate hike in December, which is still two full months away. And as we’ve seen from surprisingly low non-farm payroll reports (May 2016) and global interruptions like Brexit (June 2016), there’s still no guarantee the Fed will move in the last month of this year.

Market futures remain in the red a half hour before the opening bell, but they’re melting away since the weekly jobless claims release: the S&P 500 is now -2.5 (-3.25 previously), the Dow -20 (-25 earlier) and the Nasdaq -2.25 (-5.5 before).

Twitter Losing Interest

News on bids to buy Twitter (TWTR - Free Report) falling away — from Alphabet (GOOGL - Free Report) to Disney (DIS - Free Report) — has sent Twitter shares tumbling 17% in today’s pre-market. Salesforce.com (CRM - Free Report) appears to remain an interested party, although if Twitter shares tumbles far enough, the value aspect of buying the social media staple may become too big to pass up.

Mark Vickery
Senior Editor