The Day Ahead: Jobless Claims, ISM Manufacturing, Treasury Auction Terms
On the first day of Q2 2010, equity futures in the US are looking for a sharply higher open after investor sentiment was boosted by positive data in Asia.
In Japan, the Tankan survey of large manufacturers rose to -14 in Q1 from -24 previously, as expected, while the non-manufacturing index increased from -22 to -14, beating the consensus by 4 points.
In China, the manufacturing PMI jumped from 52.0 to 55.1 in March, just beating expectations for 55.0.
Ninety minutes before the opening bell in the US, Dow futures are up 50 points to 10,847 and S&P 500 futures are up 5.00 points to 1,170.25. In contrast, WTI crude oil is up 58 cents to $84.34 per barrel and Spot Gold is trading $2.48 higher to $1,115.73.
Whether those gains are maintained will depend on the most recent weekly labor data survey, as well as the key nationwide ISM manufacturing survey released mid-morning.
Key Events Today:
8:30 ― Initial Jobless Claims fell to 442k claims in the week ending March 20, bringing the month’s weekly average down to 450k, compared to 468k in February, 476k in January, and 474k in December. An average below 450k tends to indicate a growing labor market so further pullback could create optimism for Friday’s payrolls report (even though the monthly survey is cut off at mid-month).
“Jobless claims have moved sharply lower since their peak but remain somewhat high in level terms,” said economists from Nomura. “We think claims will need to decline further before job growth reaches trend-like levels. The total number of persons receiving jobless benefits ― through the 26-week program as well as via extended/emergency benefit programs ― appears to be leveling off. This is consistent with the notion that the unemployment rate has likely peaked.”
10:00 ― One of the most important indexes gauging economic growth is the nationwide ISM Manufacturing Index, which is set to continue accelerating in March. Economists expect the index to see a 56.1 score, well into growth mode but slightly below the 56.5 level in February or the 58.4 in January. The index has been positive for the past seven months, reflecting broad growth ― but economists often point out it gives disproportionate influence to large firms.
“February’s increase in durable goods orders, which was widespread across most components, could translate into greater manufacturing activity and an increase in the ISM,” said economists from BBVA. “The manufacturing sector has been leading the economic recovery and the resumption in industrial production. A higher ISM in March would support our expectation of an increase in industrial production, as well as in manufacturing employment in Friday’s non-farm payrolls report.”
10:00 ― After Construction Spending slipped 1.2% in December and 0.6% in January, a further 1.1% decline is expected in February. Economists have noted that despite the stimulus package, spending on public construction has been contracting at a rapid pace.
“Construction spending is weak across the board,” said economists from IHS Global Insight, projecting a 1.6% monthly decline. “In January, single-family construction fell for the first time in eight months. Public construction spending (down six straight months), nonresidential construction (down ten straight months) and multifamily construction (also down ten straight) are faring worse. We are expecting another bad reading for February, made worse by the snowstorms.”
11:00 ― The Treasury Department announces the terms of next week's 3 year note, 10 year note, and 30 year note auctions.