Given Thursday’s Thanksgiving holiday and the abbreviated trading session on Friday, a lot of major economic releases have been squeezed into today’s session. And despite the overall positive tone of this morning’s U.S. economic releases, the market will likely remain fixated on the negative headlines from across the pond in Europe. This effectively ensures that stocks will sustain the downtrend of the last few days in another low-volume trading session today, bucking the typical favorable market action of the day before Thanksgiving.
In Europe, Germany held a surprisingly less than inspiring auction for its bonds, raising questions that investors may be fleeing from the safest credit in the Euro-zone as well. The country was able to sell only EUR3.6 billion of the EUR6 billion on offer, a very unusual lack of demand for German bonds (also known as bunds). Bond yields are rising elsewhere in Europe, where new questions are being raised about the bailout of Franco-Belgian bank Dexia. Belgium is reportedly unable to meet its share of the bailout obligations, which will only add to pressures on the French treasury, which is already working hard to protect its triple-A credit rating.
The continued unsettled sovereign debt crisis is weighing on the broader Euro-zone economic outlook as well. We found last week that the broader Euro-zone GDP barely eked out a positive growth number in the third quarter and the outlook for the current quarter appears be even weaker. Today’s weak composite purchasing managers index (PMI) reading for the union is pointing towards a Euro-zone recession. We also have a weak PMI reading out of China today.
Unlike the European situation, the picture in the U.S. is quite favorable. This morning’s economic data dump provides a mixed picture, but it is unmistakably more positive than what we had been seeing a couple of months back. The Durable Goods report came in better than expected, while the Personal Income & Outlays reading was a bit on the mixed side, with Personal Income coming ahead while spending came short of expectations. The Initial Jobless Claims numbers were also a tad weaker than expected, increasing by 2K during the week to 393K. But the key thing on the Initial Jobless Claims front is that it remains below the 400K level, which is overall positive.
The takeaway from today’s economic releases is that the outlook for the U.S. economy has moved in the recent past beyond the recessionary talk. While this data shows that the economy is clearly not heading towards a recession, it is less than helpful in handicapping the extent of its underlying momentum. And developments on the domestic political front and in Europe do not help in that effort, either.
On the earnings front, we saw Deere (DE) come out with better-than-expected results this morning and guided higher. We also have positive results and guidance from TiVo (TIVO), the maker of digital video recorders. Pandora (P), the online music service, came out with positive quarterly results, but its guidance fell short of expectations.
