Intraday Market Update
After initially shedding -6 points from Wednesday's closing print the S&P 500 futures proceeded to bounce +14 points overnight, reaching a high of 1,117.50 just before the 8:30 AM jobless claims report. Then the futures took a hit after both initial and continuing weekly jobless claims rose over last week's figures, which were also revised higher again, creating more doubt over the health of US employment outlook. Nonetheless the US equities opened near breakeven and even spiked higher in early trading. However, stocks took a nosedive after the Philly Fed Manufacturing Index tumbled much more than anticipated. Stocks have pared some of the losses and are trading in the middle of their morning ranges. All of the major indexes are down about breakeven. The EUR/USD currency pair peeked above 1.24 for the first time since May but has since backed off as European leaders are meeting for a summit today to discuss their sovereign debt crisis.

Weekly initial jobless claims increased +12,000 to 472,000 compared to 460,000 last week, which was revised + 4,000 higher. Consensus estimates called for claims to decrease to 450,000. The four week moving average which smoothes the trend in claims fell by -500 to 463,500. However, continuing claims increased +88,000 to 4,571,000 compared to estimates calling for an increase 4,500,000. Although the outlook for the US economy has been improving, employment growth is a necessity for a healthy recovery and we are clearly not getting it.

Meanwhile, the reading of business activity in the mid Atlantic region as measured by Philly Fed Manufacturing Index fell from 21.4 in May to 8.0 in June. The forecast was for a slight decrease to 20.0. A reading of zero is the breakeven point between expansion and contraction so this was a big decline. Shipments declined slightly while the employment index fell below zero, adding to further concerns about the future of the US employment picture.

The unfavorable economic data overshadowed the good, at least good on the surface. The Leading Economic Indicators came in at 0.4% compared to -0.1% the prior month. The headline number looks good but the gains are centered on the yield curve which has a wide spread between short and long term rates. Another large contributor to the positive number is an excessive money supply which is hard to measure and volatile. Positives included the factory work week which was confirmed in yesterday's industrial production report.

In equities, J.M. Smucker announced strong earnings and guidance and shareholders are being rewarded as the stock is up almost +7%. Supermarket chain Kroger beat expectations and reiterated its 2011 outlook. Shares of KR are up +3%, but are off their highs and heading lower. Smithfield Foods reported slightly higher than expectations but offered cautious comments on its guidance. SFD is down -5.8%. Consulting services and data provider IHS (+5.4%) reported earnings ahead of estimates. Pier One Imports reported a profit compared to expectations for a loss. PIR was higher by +8% but has backed off and is now up +2.5% mid morning. Winnebago crushed earnings expectations but the beat was mainly due to a one time tax benefit. The firm's revenue were slightly below estimates. WGO was up more than +18% but has since pared the gains and is higher by +11.50%. Health insurance name Aetna is up nearly +4% after offering strong guidance saying it would exceed consensus estimates in its Q2 report. Steel Dynamics (STLD) lowered their Q2 guidance from EPS $0.20-0.25 v $0.35e. STLD is down -2.50%.

Commodities/Currencies:
The larger than expected build in weekly crude inventories yesterday seems to be affecting crude today as it has shed over $1. Gold, silver, and natural gas are gaining while copper is under pressure.

Core Sector List:
Overall reading: 12 sectors declining, 4 sectors advancing
Strongest Sectors: Gold Miners, Utilities, Insurance
Weakest Sectors: Home Construction, Retail, Broker Dealers

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