April 7, 2012 Initial Jobless Claims Temper Markets As Investors Await Earnings from Tech and Financials:

Initial jobless claims increased jumped unexpectedly which raised concerns that the U.S. job market could continue to grow at a sluggish pace for the next few months.  This is the first time jobless claims have risen in a year and most economists weren’t expecting this.  Yesterday we wrote: “Tomorrow’s initial jobless claims numbers could change medium term investor sentiment if the data is marginal.”

The economy is growing at a slow pace compared to other post recession activity and the combination of tax uncertainty, fiscal policy issues and European headline risk have returned to the market similar to mid year 2011.

The Labor Department said today, initial jobless claims rose by 13,000 to a seasonally adjusted 380,000 for the week ended April 7 which was the largest weekly rise in almost one year.  While this may not spell a long-term trend change, we would still consider this a short-term inflection point regarding the rate of change that is a meaningful data point.  The four-week moving average of employment benefits claims which is a less volatile measure increased by 4,250 to 368,500, but remains near a four-year low.

Stocks rose in early trading today by triple digits pushing the indexes back above key technical levels.  The S&P rose above 1,375 as investors wait for earnings from Google’s first quarter 2012 and financials.  Financial stocks continue to be on our watch list as well as small cap stocks.

In a recent interview, Jamie Dimon of JP Morgan stated he believed the economy was improving and this could be reflected in some of the numbers that will be reported soon.  Although expectations have dropped considerably in the last few weeks, aggregate earnings may not disappoint.  Alcoa already surprised to the upside which has helped bullish sentiment this week.