Economic & Earnings Commentary

Pre-market indexes are in a giving mood an hour ahead of today’s opening bell. By that I mean they're giving back most of the gains made on Wednesday, which was the first up-day in the past three sessions. The Dow is currently -414 points, the S&P 500 -71, the Nasdaq -326 and the small-cap Russell 2000 is -32 points at this hour.

The European Central Bank (ECB) lowered interest rates 25 basis points (bps) on its three key levers, most notably its Deposit Facility, which is now down to +2.50%. Even though this was telegraphed earlier, a plurality of analysts had thought a burgeoning trade war between the EU and the U.S. may have signaled a more cautious stance. Today’s move is mainly a signal that the ECB sees inflation now under control. This is the sixth downward move since June of last year.

This is also despite a big jump in German bund yields yesterday, which moved up 30 bps to around +2.85% — the highest level since East Germany reunited with West Germany back in 1990. Germany has the largest economy in the EU, so its economic behavior is worth paying attention to as the EU moves toward a lower interest rate environment.

Weekly Jobless Claims Mixed

Initial Jobless Claims for last week came in lower than expected — +221K versus +235K anticipated, and notably down from the unrevised +242K from the previous week. This represents good news in that the higher previous-week levels have not begun a surge meaningfully higher at this time. We haven’t been at weekly jobless numbers north of 300K since the fall of 2021, when they were coming down rapidly as the Great Reopening emerged.

Continuing Claims, on the other hand, moved back toward +1.9 million: 1.897 million, to be rather exact. We last hit the +1.9 million mark in the second week of January, and the last time we were over +2 million longer-term jobless claims was back in November of 2021. That’s the psychological level where analysts, economists and perhaps market participants may start to feel the U.S. labor market is less robust than it has been over the past few years.

Q4 Productivity Revised Up, Labor Costs Down

For some more good news this morning, a revised take on Q4 Productivity rose 30 bps to +1.5% this morning. It’s the ninth-straight upward move in U.S. productivity. Meanwhile, Unit Labor Costs were revised to +2.2% — now lower than the +3% gains we’d been seeing in previous quarters. More productivity and lower costs? Win-win.

January Trade Deficit Plummets to Record Depth

Balancing this good economic news is an all-time low (high?) -$131.4 billion on the U.S. Trade Balance. Expectations were already for an all-time high (low?) -$128.7 billion, from the previous month’s -$98.4 billion. Much of this is conditional on an expected trade tariff environment, as importers and exporters raced to make deals ahead of double-digit increases in tariff levels from the White House.

What to Expect from Today’s Stock Market

Following this morning’s earnings beats from Macy’s (M Quick QuoteM - Free Report) , Burlington Stores (BURL Quick QuoteBURL - Free Report) and Cracker Barrel (CBRL Quick QuoteCBRL - Free Report) , after today’s close we’ll hear from major chipmaker Broadcom (AVGO Quick QuoteAVGO - Free Report) and discount retail club Costco (COST Quick QuoteCOST - Free Report) . In between, Wholesale Inventories for January and public statements from Fed Governor Christopher Waller and Atlanta Fed President Raphael Bostic will potentially make headlines.