EmailGlobal equity markets are trading sharply lower Thursday morning, and the general consensus behind the decline seems to be concerns regarding global growth prospects, though the lingering eurozone debt crisis certainly remains on the minds of investors.
An important item to understand this morning, though, is that news flow has been light.
Yes, Morgan Stanley becoming the latest firm to lower its economic outlook certainly adds fuel to the fire regarding global growth prospects. And yes, reports that the Federal Reserve Bank of New York is intensifying its scrutiny of the U.S. operations of Europe's largest banks keeps the eurozone debt crisis in focus.
But this morning's sell-off is not coming from any new catalyst. Instead, it is a continuation of the negative sentiment that has plagued the market these last few weeks.
S&P futures are currently trading down 2.3%. European markets are seeing even sharper losses, with Germany's DAX off 3.7%.
Safety assets have resumed their rally this morning. Gold hit a fresh record high of $1821.80, the dollar is broadly higher (after trading broadly lower yesterday), and the 10-year Treasury yield is back below 2.10%, approaching last week's record low of 2.03%.
This morning's negative sentiment preceded an important batch of U.S. economic data.
The first round contained few surprises, but was enough to send U.S. futures to fresh lows.
Initial jobless claims rose 9,000 last week to 408,000 (Briefing.com Consensus 400,000). That is the fourth consecutive week that the claims level has held below the upper bound (410,000) of our "recovery zone," where payroll growth is enough to sustain a stable unemployment rate. Unemployment remains high, however, and these figures need to fall further to signal a reduction in the unemployment rate.
Core CPI came in as expected at 0.2%, but total CPI came in hotter-than-expected at 0.5% (consensus 0.2%). The surprise was due to statistical adjustments, however, as gasoline prices fell 1.5% in July but seasonally adjusted prices increased 4.7%.
The second round will be released at 10:00 a.m. ET, and includes July existing home sales (consensus 4.87 million), August Philadelphia Fed (consensus 1.0) and July leading indicators (consensus 0.2%).
Thursday's earnings calendar is lighter than earlier in the week. Sears Holding (SHLD) missed badly on the bottom line (by $0.48) on a decrease in gross margin due to promotional activity and as the company cleared seasonal inventory. HP (HPQ) will report after the close.
--David M. Campione, CFA
Dave is an analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
