This morning's jobless data came in about as expected with a slight rise to 281,000. Initial claims rose 14,000 in the week following a slightly revised decline of 21,000 in the prior week.
But the 4-week average, which helps smooth out weekly bumps, is down for a 3rd straight week, 3,000 lower to a 282,250 level that is more than 20K below the month-ago reading.
As Bloomberg reporters noted this morning, "This is a sizable improvement and hints at bounce-back strength for the April employment report."
The context for dissecting this employment data will be, of course, yesterday's release of the March FOMC minutes which showed the same mix of views from voting members that we would expect: some are eager to "get off zero" by June and others think we can wait a while to start "liftoff."
And keep in mind that those FOMC minutes are from a meeting that happened before the surprising plummet in job growth we learned of last Friday. Score one for the doves.
But a new conversation is beginning to develop where maybe the Fed can have it both ways. First, they could raise rates 25 basis points between June and Sep and then maybe again by December. Then they could back off for a bit, instead of embarking on a "fast and furious" schedule of hikes.
In other words, it would "one (or two) and done." This would get them out of the conundrum of appearing to stoke a bubble with zero rates for over six years in a strong economy and an even-stronger stock market. It would also give them plenty of room to remain accommodative as they watch the weaker economic data of late and its impacts on the labor outlook.
The trick will be in convincing financial markets that this is not only viable but that they are sincere in their word. That will take some unprecedented verbal gymnastics and telegraphing. Just when we thought things were simple again with the removal of the word "patient," they could become a whole lot more "subject to interpretation" in the coming meetings.
Earnings Begin
In earnings news, Alcoa (AA) shares are off about 2% in pre-market trading after the company offered a miss on the topline late yesterday and a moderate EPS beat. Helping kick-off earnings season on Wednesday, RiteAid (RAD) shares delivered a whopping 70% EPS beat but shares have stalled after doubling in the past six months due to questions about the tax benefits that created that beat and also company guidance going forward.
And this morning, Walgreens Boots Alliance (WBA) reported a 25% EPS beat in its first quarterly report of the newly formed company. Revenue came in about 4% light, but significantly higher on a year-over-year basis. Analysts are likely still getting their estimates fine-tuned for the "alliance" but Wall Street likes the news so far with WBA shares up over 2.5% before the open to new highs above $90.
Hawks vs. Doves
Looking ahead, we get Wholesale Trade data at 10 ET this morning and Import-Export Prices on Friday at 8:30 ET. But Friday market action might be dominated by two Fed speakers on opposing ends of the Hawk-Dove spectrum.
Speaking at 8am ET from Sarasota, FL on the economic outlook, Richmond Federal Reserve Bank President Jeffrey Lacker may substantiate his case for a June liftoff. Lacker, who has long called for a prompt tightening of monetary policy, said consumer spending, the labor market and other economic conditions have improved significantly over the last year.
Than at 12:20pm ET, Minneapolis Federal Reserve Bank President Narayana Kocherlakota gives a speech, in Bloomington, MN. I don't know what the topic is, but all ears will be listening to this super-dove for his economic views on why rate hikes should wait another year to begin.
It should be a very interesting end to a week when the stock market is looking forward with great optimism to hundreds of earnings reports in the next three weeks. They will confirm whether an earnings recession has taken hold or growth is coming back by summer.
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