THOUGHTS ON THIS MORNING’S DATA

THOUGHTS ON THIS MORNING’S DATA

Courtesy of The Pragmatic Capitalist

Markets are tumbling this morning job fears and sovereign debt concerns weigh on the market.  In the mess of bad news was one bright sign – same store sales.  Retailers posted chain store sales results and the data was positive.  Overall data was up 3.3% – the best reading in 21 months.  The large department stores posted solid numbers across the board.  Kohls posted a 6.5% gain, Macy’s posted a 3.4% gain, Neiman Marcus posted a 4.5% gain, Nordstrom posted a 14% gain, Saks posted a 7% gain and Target posted a 0.5% gain.  Unfortunately, the sustainability of this strength is in question as consumer de-leveraging and joblessness continues to weigh on the market.  In addition, I would be concerned that the stronger same store sales figures are simply a measure of weak comps and higher efficiency (maintenance of higher performing stores and better inventory management). Nonetheless, several companies raised their guidance as analysts remain woefully behind the curve.

A bit of the selling today might be a move to get ahead of tomorrow’s big job’s report.  Jobless claims posted another disappointing reading at 480K.  This was up from last week’s 470K reading and substantially higher than the consensus at 455K.  The recent reversal in claims is most unwelcome news for the bulls.  Just when the job market appeared ready to go positive it gets slammed back down again.  Recent data has not been particularly constructive on the job’s front.  Continuing claims also jumped 2,000 to 4.6MM.  Not good signs for an economy that remains fragile.

The news of the day is a continuing worry as the problem of debt continues to hamper the global recovery.  Credit concerns in Greece, Spain and Portugal are weighing on markets.  Credit spreads are blowing out and it’s quite clear now that the warning shot from the CDS market in early January was not to be ignored.    This all has a very Lehman-like feel to it.

We issued a “must sell” at S&P 1,120 and still maintain this position.  Specifically, we said:

“The details are few at this time, but that is stunning, must sell stock news.  We continue to believe the secular bear market is with us, and such policy action creates a sense of uncertainty that is simply staggering.   I would use strength in the coming days and weeks of earnings season to reduce risk until some of these clouds clear.”

The three pronged worries that overhang this market (regulation, sovereign debt & China’s tightening) are still with us.  Although I still maintain the position that this is not a major market top our near-term outlook remains risk averse.  Equity markets will not rise with this kind of uncertainty overhanging.  Caution and risk management remains the name of the game.