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Jobless claims better than expected

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This morning's jobless claims number finds stock futures holding onto fraction gains as first-time claims for unemployment benefits fell by 56,000 in the latest week to 395,000. Economists were looking for a decline in jobless claims of 25,000. Today's reported decrease brought the four-week average of initial claims to the 410,500 level, which is the lowest since the September 11th terrorist attacks.

Continuing claims dropped by 166,000 to 3.53 million in the week of December 29th. The four-week average of continuing claims fell by 28,000 to 3.64 million, which is the lowest since October 20th.

Economists are cautioning against reading too much into any individual week's jobless numbers, especially during holiday periods when seasonal adjustments could cloud underlying trends.

Regardless, Federal Reserve policymakers should gain some hope from the steady decline in the four-week average of first time claims as it trends lower from its 505,750 peak in the week of October 20th. This Friday, Fed Chairman Alan Greenspan delivers his first major address on the economy since September.

The FOMC's next scheduled meeting is January 29th and 30th. Financial markets are giving slight odds for another rate cuts sighting low inflation could still give the Fed some room.

Stock futures edging lower, but still green

When this morning's jobless numbers were released, stock futures were up, but have drifted back from earlier levels. S&P futures are currently up 1 point, NASDAQ futures are higher by 6.5 points and Dow futures are up 14 points.

Fair value for the S&P 500 today is $1.20. HL Camp & Company has their computers set for program buying at $2.26 and set for selling at $-0.16. Fair value for the NASDAQ-100 today is $5.70.

Bonds and gold

Treasuries are modestly higher this morning as YIELD drops across all the major maturities. The February Gold Futures contract is jumping higher by 1.4% to $287.80.

This action as laid out in last night's market wrap on premierinvestor.net should have broader market equity traders cautiously bearish at the open of trading. The buying in bonds and buying of gold does NOT make sense as it relates to an inflation scenario, but does hint that there may be some concern among market participant regarding financial or currency issues somewhere around the globe.

Bearish traders may want to consider a bearish trade in the S&P SPDRS (AMEX:SPY) with a stop just above the recent highs of $118 and targeting the $110-$112 level. This may also be considered a hedge position for some investors holding a broader equity market exposure.

Jeff Bailey
Senior Market Technician
Option Investor

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