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Headline numbers boost futures higher

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This morning's dose of economic data has stock futures building gains as personal income, spending and jobless claims came in better than economists had expected.

Personal income measured in current dollars rose a modest 0.1% in October, while September's 0.4% rise was unrevised. October's 0.1% gain was slightly better than the unchanged level forecasted by economists.

While incomes edged up, consumer spending rose 0.4% in October after falling an unrevised -0.4% in September. Economists predicted that spending would rise 0.2%.

Purchases of durable goods, which include autos, fell 0.9% after tumbling more than 5% in September.

Non-durable good purchases, such as groceries and gasoline, rose 0.5% last month after falling 0.3% in September. Spending on services was recorded at a 0.2% gain, matching September's rise.

Inflation showed no accelerations for most goods and services according to the PCE deflator, a measure of prices. It increased 1.7% in October after rising 2.2 percent a month earlier. The core PCE, stripped of the volatile food and energy components, rose 1.8% verses 2.7% in September.

The difference in spending to incomes shows that consumers dipped into savings or extended credit to fund their October purchases.

Personal savings was $335.3 billion in October compared to $346.9 billion in September. Saving as a percentage of disposable income was 4.2% in October, down from 4.4% a month earlier.

On the jobs front, weekly jobless claims fell by 17,000 to 364,000, which was better than the 9,000 gain economists had expected.

The four-week average for first-time claims for state jobless benefits fell by 11,250 to 385,750, which is the lowest in 15 weeks and further below the 400,000 "waterline" that economists view as a stabilizing job market.

A Labor Department official said the claims data show extreme volatility at this time of year, clouding the normal seasonal adjustment process. In fact, unadjusted claims actually rose by nearly 60,000 last week, but the seasonal adjustment factors "expected" a larger increase.

Continuing claims showed that workers already having been receiving state benefits rose by 91,000 to 3.65 million, the most in six weeks. The four week moving average for continuing claims rose by 17,500 to 3.6 million and shows that those receiving benefits are still having a tough time finding a job to their liking.

The Federal Reserve has said that while it is cautiously optimistic about the chances for a broad economic recovery in coming months, final demand remains vulnerable to weak hiring and a potential war with Iraq.

The above mentioned economic data along with some positive comments out of chip equipment maker Novellus' (NASDAQ:NVLS) $34.48 mid-quarter conference call and pre-market trading at $35.85 is giving a boost to futures.

S&P futures (sp02z) are gaining 8.8 points to 920.30, NASDAQ futures (nd02z) are higher by 20.5 points at 1,109 and Dow futures (dj02z) are up 75 points at 8,740.

Treasuries are seeing selling across the major maturities with the benchmark 10-year bond's YIELD ($TNX.X) rising to 4.133%, which hints at a bullish response toward this morning's news.

Fair value for the S&P 500 today is $0.12. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.62 and set for selling at $-1.37. Fair value for the NASDAQ-100 today is $1.25.

Jeff Bailey

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