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Mid-Day Recap: Stocks Rebound After Weaker Than Expected Data
All three data reports this morning showed greater declines than expected, with retail sales sinking in June, jobless claims rising in August, and inventories being slashed at the close of the second quarter. Markets sunk on the first two reports, but the reduction in business inventories boosted investor confidence that the economy is ready for a rebound in the current quarter.rnrnNinety minutes into Thursday’s session, all three indexes have climbed out of the red. The S&P 500 and Nasdaq are each trading 0.51% higher at 1,011 and 2,009, respectively, while the Dow trails behind with a 0.31% advance to 9,391.
Businesses Continue to Cutback Inventories
It’s up for interpretation whether this is good or bad news. Businesses slashed their inventories by the 10th straight month in June and by a greater margin than expected ― -1.1% versus expectations of -0.8%. rnOn the surface that’s bad news. But it’s now mid-August, the economy is thought to be stabilizing, and the more inventories were slashed in the past, the more they can grow in the future. So reduced inventories are bad for second-quarter GDP, but for the current quarter the report suggests businesses will have to restock as soon as executives are confident that recovery is underway.rn
Jobless Claims Rise, No Signs of Job Creation
The weekly labor report was mixed, with the main story still being that there are no signs of job creation as the recession comes to a close. First-time jobless claims in the first week of August came in at 558k, and the prior week’s 550k print was revised up 557k.rnrnIn other words, the past two weeks have seen over one million Americans file for unemployment benefits, and the trend, while not as bad as the first several months of the year, isn’t improving on a weekly basis.
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