The Market Today
Jobless Claims Hit Lowest Level Since the Jackson Five’s First Appearance on the “Ed Sullivan Show”
by Craig Dismuke, Dudley Carter
Initial Jobless Claims Fall to 49-Year Low, Durable Goods Orders Disappoint: This morning’s U.S. data was a bit of a balancing act for the business outlook, showing businesses continue to maintain a stable worker headcount but spent a little less on equipment in the first quarter than expected. Initial jobless claims were surprisingly strong, falling from 233K in the week ended April 14 to 209k for the April 21 week. At 209k, initial claims were the lowest in 49 years with the last better print of 202k occurring all the way back in December of 1969 (the month that the Boeing 747 jumbo jet made its first public preview flight and the Jackson Five made their first appearance on the “Ed Sullivan Show”). The claims data continue to be one of the strongest signals of a healthy labor market. While businesses payrolls remained strong, the activity around business spending was less cheerful.
Durable goods orders rose 2.6% in March, outpacing estimates of 1.6%, but were propped up entirely by the volatile transportation category. Total transportation orders were up 7.6% in March thanks to a second consecutive month of strong nondefense aircraft orders. Total private aircraft orders were up 44% following a 39% gain in February, directionally consistent with the better-than-expected earnings release from Boeing yesterday that helped prop up the Dow (more below). Excluding transportation, orders were flat and fell short of the 0.5% gain expected. The weakness at the core level was in part because of softer spending by businesses on capital goods. Core capital goods orders fell 0.1% (expected +0.5%) and shipments of the same fell 0.7% (expected +0.3%). Adding to the disappointment in the current month, there was a negative net revision for the first two months of the year. As a result, the trends for business spending look weaker than initially expected and pose some downside risk for fixed investment in tomorrow’s GDP report.
Yesterday – Stocks Steady as 10-Year Yield Stays above 3.00%: Stocks kept it together on Wednesday even as the 10-year Treasury yield pushed to its highest close since 2013. The major indexes managed to bounce back from an early morning drop and end the day mixed. Tech was weaker and the Nasdaq slipped a hard-to-see 0.05%. The Dow led with a 0.25% improvement and was propped up by a big gain in shares of Boeing. The company easily beat estimates for revenue, earnings, and free cash flow and boosted its full-year outlook. The S&P 500 gained 0.18% as telecommunication and energy companies tied for the index’s top spot. The 10-year Treasury yield, which pulled back amidst the early weakness for stocks, reversed to close near its highs of the day at 3.03%. The 2-year yield fell 0.2 bps to 2.49%, pushing the spread between 2s and 10s to almost 54 bps, the most since March 26. The Dollar ended at a more-than-three-month high.
Overnight – ECB Makes No Changes in Official Statement: Mixed finishes for Asian equities gave way to more widespread strength across Europe and U.S. equity futures were earlier pointing to more gains. Earnings continue to affect activity around the globe with the quarterly reporting season in high gear. Although global stocks had come to grips with the 10-year yield above 3.00% without a major disruption, a move back below that level likely helped with the positive risk tone overnight. Global yields had pulled back beginning early in the European session as investors awaited the ECB’s latest decision. The central bank made no changes to rates or its official Statement, maintaining a pledge to keep rates “at their present levels for an extended period of time” and to buy 30B Euro of bonds “until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.” The German 10-year showed little response to the release and was down 2.2 bps. The 10-year Treasury yield was 3.7 bps lower at 2.99%.