If we're to believe Associated Press reporter Daniel Wagner, this morning's report from the Department of Labor on unemployment claims revealing that initial claims during the week ended August 6 fell to 395,000, was "good news." Why, according to Wagner, that drop, all by itself, it was "enough to catapult stocks," pushing the Dow up by 423 points in Thursday's trading.
Uh, not exactly, Daniel. First, though the decline in initial claims was in the right direction, it was only 5,000, or 1.25%, less than last week's original number of 400,000 (naturally revised up to 402,000 this week), and an even tinier 3,000 fewer than the initial number two weeks ago. If (more like when, given the track record of previous weeks) it's revised up by 3,000 or so, it will be even less impressive. Huge advances in the Dow do not arise from such tiny improvements.
At The Street.com, Chao Deng had a more measured take on today's market results, but his attempted explanation didn't make a lot of sense either:
Stocks soared Thursday, extending this week's dizzying up-and-down action, as the Dow Jones Industrial Average retraced much of its recent decline with help from modest improvement in employment data and a strong quarterly report from Cisco.
Though AP's Wagner didn't identify Cisco in his report, that's actually okay, because the markets had plenty of time to digest Cisco's strong earnings result as well as the unemployment claims report before the opening bells rang. At 8:45 a.m., 15 minutes after the unemployment claims report's release, Dow futures were down 48.
CNBC's Bob Pisani identified three items influencing the markets' good day which at least had some potential to make sense:
The stock market moved because there are some data points surfacing that things might be changing.
1) announcement of a Sarkozy-Merkel meeting next week reversed the downward trend prior to the open. The perception: they're going to address the possibility of an EFSF bailout of every country.
"If Merkel comes out to support the EFSF, or a eurobond, then that's all you need," one trader told me. "She likely has enough to jam it thru Parliament."
2) Rumors of European short selling ban surfaced, particularly in Italy. Hopefully this will turn out not to be true.
3) Insider buying, corporate buybacks jump. This was widely discussed on trading desks today. How do you know when you're at a bottom? It's hard to tell, but when insiders and corporations show signs of buying, that's at least a good starting point.
Sorry, Daniel Wagner, I'm not buying what you're selling on today's marginal improvement in DOL's unemployment claims report moving today's markets -- nor should any of your wire service's readers, listeners, or viewers. Unfortunately, many will, because they don't follow the news that closely, and subscribing outlets will mostly not have the time to determine that the info you provided is pap and not fact.
This shows once again how poorly we are served by the self-described Essential Global News Network.
Cross-posted at BizzyBlog.com.
