Ahead of Wall Street - August 9, 2012 - Ahead of Wall Street
09 Agosto 2012 - 11:09AM
Zacks
Thursday, August 9, 2012
Central banks remain the primary props behind the all-around air
of optimism in the market. And it’s just not the U.S. Federal
Reserve that is expected to do its bit to juice up the economic
scene, the European Central Bank (ECB) and the People’s Bank of
China (PBOC) are equally expected to remain in an activist
mode.
This set of expectations is prompting market participants to
scrutinize every incoming economic data from a monetary policy
perspective. The ECB is battling a different kind of monster, but
this morning’s inflation data in China and Jobless Claims data in
the U.S. is seen as supportive of further central bank easing.
On the initial Jobless Claims front, we got a better than
expected drop of 6K increase in initial claims to 361K (a decline
of 4K when combined with revisions to the prior week’s tally), with
the 4-week average going down 2.9K to 368.3K. With the auto
sector’s seasonal shut-downs now behind us, this is perhaps the
‘cleanest’ jobless claims data that we have seen in the last many
weeks. This level of initial Jobless Claims is generally considered
consistent monthly payroll gains of 150K to 170K or around the July
level we saw last Friday.
With respect to China, this morning’s 1.8% increase in the July
CPI is seen as favorable to more easing action by the PBOC. While
the July CPI increase was a tad bit higher than expectations, it is
nevertheless a deceleration from June’s 2.2% increase and follows
increases of 3.6% and 3.4% in April and March, respectively. The
deceleration in the Chinese inflation readings gives the country’s
monetary and fiscal authorities the space to implement more
stimulus measures to improve the economy’s growth outlook.
It is far from clear at this stage whether the recent run of labor
market data is consistent with more Fed QE. I think it is not, but
this is a minority view as a growing number of economists see the
Fed coming out with another round of bond purchases in its
September meeting. Macroeconomic Advisors (MA), the economic
forecasting firm that we consult with, is now calling for the Fed
to come up with a $600 billion to $750 billion QE3 program next
month. And they credit the new easing program in their forecasts to
add a quarter percentage point to GDP growth and a modest decline
in the unemployment rate. But they are hardly alone in this line of
thinking; most of the recent stock market gains can be assigned to
this Fed outlook.
On the earnings front, we got positive guidance from
Brinker International (EAT), after the restaurant
operator came out with better than expected earnings on in-line
revenues. Results from Wendy’s (WEN) were in-line,
though North American comps were positive. Kohl’s
(KSS) results were largely inline with expectations, though the
retailer’s comps were on the weaker side. We have
Nordstrom (JWN) reporting after the close
today.
Sheraz Mian
Director of Research
BRINKER INTL (EAT): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
KOHLS CORP (KSS): Free Stock Analysis Report
WENDYS CO/THE (WEN): Free Stock Analysis Report
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