Bank Earnings And Jobless Data Disappoint

Bank Earnings And Jobless Data Disappoint

The earnings season got off to an encouraging start earlier this week, but it is not a theme that has continued, with JP Morgan disappointing yesterday and Bank of America and Citigroup following suit today, which has contributed to stocks heading lower again.

Bank Earnings And Jobless Data Disappoint
Bank Earnings And Jobless Data Disappoint

By early afternoon in New York, the Dow Jones was down 95 points or 0.54%, while the broader S&P 500 Index dropped the same percentage to sit just above the key 2000 mark.

Uncertainty in the market was added to by the day’s economic data today, which was more discouraging on balance, despite a rebound in manufacturing conditions in the New York region. The number of first-time claimants for unemployment insurance jumped 19,000 last week to 316,000, while initial claims for the week prior were revised up from 294,000 to 297,000. This takes the four-week moving average to 298,000 from 291,250 and raises questions of whether improvements in the labor market are starting to plateau.

The Empire State Manufacturing Survey jumped to a reading of 9.95 this month, bouncing back from -1.23 in December. This result was somewhat offset by less encouraging news from the Philly Fed, whose General Business Conditions Index fell sharply to 6.3 this month from 24.3 in the month prior. Harder data on the manufacturing sector becomes available tomorrow for December with the release of Fed’s Industrial Production report.

Prices ease at producer level
Falling energy costs continue to drag on prices, at least at the producer level, according to a report released today. The Producer Price Index for final demand declined 0.3% in December, following a fall of 0.2% in November. This takes the year-on-year change to +1.1%. Excluding the more volatile components of food and energy, though, the price index for final demand rose 0.3% in December.

Overall the report offers yet more evidence that inflationary pressures are effectively non-existent. While such results have been embraced positively in recent months by the market, indicating as it does that the Fed has a free hand to maintain accommodative monetary policy, there is now increasing concern that there may be deflationary risks, especially given developments in Europe.

Swiss franc rockets after SNB aborts cap
The forex markets have been shaken up today by the surprise announcement form the Swiss National Bank that it will no longer intervene to stop the Swiss franc appreciating against the euro, abandoning its EUR/CHF peg of 1.20. The central bank may have felt it was untenable to keep buying euros to bolster the EUR/CHF exchange rate when the ECB seems to be on the cusp of full-blown QE, but whatever the reasoning, the result of the shock news has been a drastic appreciation in the value of the Swiss franc. USD/CHF has fallen 13.7% to 0.8790, while EUR/CHF is down close to 15% at 1.0210.

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