Market comments for Aug. 18th, 2011: We're headed down! (2 UPDATES)

Data released this morning on Initial Jobless Claims shows that we have gone back over 400K again to 408K. Expectations were for 400K. Last week's number of 395K was revised upwards to 399K.

Futures markets are down significantly but the Initial Jobless claims is not the issue causing it to be down over 225 points in the Dow Futures. Also this morning the CPI number for July was released and it is up +0.5%, which was a very inflationary number. Expectations were for only a +0.2%. These numbers when annualized show a very different picture. You see with only a +0.2% CPI, that at an annualized rate would give a2.4% inflation rate, but a +0.5% number, the annualized rate would be 6.0% inflation rate!

The Core CPI rate came in at expectations of +0.2%.

The German's DAX Index is down -227 points right now, or 3.7%, as its markets are open for trading. The UK's FTSE is down -2.5%, France's CAC 40 is down 2.9%. We are going to see a large sell-off in US Markets this morning!

Another factor of why stocks are down significantly worldwide are these comments made yesterday. This from Bloomberg news: "Federal Reserve Chairman Ben S. Bernanke’s pledge last week to keep interest rates near zero until mid-2013 was 'inappropriate policy at an inappropriate time,' Charles Plosser, president of the Fed Bank of Philadelphia, said yesterday in a Bloomberg Radio interview.

The comments from Plosser and Fisher put focus back on how committed the Fed is to the zero-interest rate policy ahead of Bernanke’s comments next week,” said Anders Eklof, a currency strategist at Swedbank in Stockholm. “The Fed has obviously been wrong about the economy, once last summer and then now."
Dallas Fed President Richard Fisher said the central bank shouldn’t enact policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement."

And lastly, here's a question for you: Where would you have made the biggest gains if you invested in Gold or Silver exactly one year ago? It's not what you expect. :) It was Silver! Silver gained over 53.8% while Gold gained 47%. Surprising isn't it!

UPDATE: 7:20am PST

Philadelphia Fed Survey data surprised investors this morning because the news was so terrible. The prior period's data came in at +3.2, while consensus was at +4.0, but the data actually came in at -30, as is shown in the chart below by Haver Analytics.


UPDATE #2: 8:45am PST

Consumer confidence in the U.S. economic outlook slumped in August to the lowest level since the recession, raising the risk that spending will dry up.
The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 34, the weakest since March 2009, from minus 22 in July. The weekly measure of current conditions was minus 48.3 for the period ended Aug. 14 compared with minus 49.1, which was the worst reading since mid-May.

Market comments for Aug. 19th. (Update)

The Initial Jobless Claims number was announced this morning with the following headlines. "Initial Jobless Claims rose "unexpectedly" to 500,000, the highest since November of 2009, showing companies are stepping up the pace of firings as the economy slows." That says it all. The only thing I would add to the announcement is that many people, including me, expected the number to increase, not decrease. Signs are all around us that the economy is slowing if people just open their eyes.

The prior week's reading was also revised upward from 484,000 to 488,000 Initial Jobless Claims.

The Dow Futures was up about 50 points before the news as was European markets but after the news all fell into the negative. Now the Dow Futures is up slightly.

I expect the market to sell off today, even though it looks like a moderate gain at the open. This news is terrible for the Average family across America, as it says their jobs are even more at risk and this will have a significant affect on Consumer Spending for this quarter and the remainder of the year. This also sets up the Fall Mid Term elections against incumbents and especially Democrats who will most likely lose many seats in Congress to Republicans. So this could start the expected downturn in the market setting up a bad Sept. and October. Options for August expire tomorrow.

I noticed that not much discussion on CNBC this morning about the topic as they appear to want to hide it or get people focused on other news. Dow Futures now down -1.

Update: 7:05am PST

The Philly Fed Index came in a whopping -7.7 for August compared with +5.1 for July. The market has reacted appropriately dropping down about 150 points on the Dow. Other news was that the Leading Indicators came in at +0.1%, which was expected. I believe this number will be revised down next month.