Mid-Morning Recap: Directionless Trading One Day Ahead of Nonfarm Payrolls

Markets have been volatile Thursday morning as investors react to decent labor data, poor retail reports, and mixed speeches from central bank officials. Trading has been directionless after a higher open, and roughly 90 minutes into the session each major index is slightly higher on the day.

The S&P 500 is showing a 0.64% gain to 937, while the Dow is up 0.49% to 8718, and the Nasdaq stands 0.61% up to 1836.

The day began on a high note as the weekly Jobless Claims survey saw continuing claims fall for the first time since January. Initial claims also fell 4k to 621,000, but have been above the 600k threshold for 18 straight weeks now.

Revisions to the Q1 Productivity and Costs were also positive. Nonfarm productivity was revised up to +1.6% from +0.8%, and unit labor costs were revised lower to +3.0% from +3.3%. 

The reports allowed the market to open higher, despite comments from Cleveland’s regional Fed President Sandra Pianalto, who said economic recovery could be slower than expected.

"Once the recession ends, we may be tempted to hope that the economy will take off at a full gallop, but that is not likely to happen because of some long-standing imbalances within our economy," Pianalto said to the INVESTKentucky conference on Thursday.

She said a drive towards greater savings will hurt the prospect for a quick recovery, though in the long term increased savings could translate into a bigger pool for investments.

William Dudley, president of the New York Fed, also gave a speech before the opening bell defending the Fed’s flagship loan facility.

Defending the Term Asset Backed Securities Loan Facility (TALF), which is aimed at financing loans to small businesses, students, credit-card holders, and auto-buyers, Dudley said the facility needs to find a broader base of investors due to falling interest rates. 

“The broader the investor base, the greater the demand for the securities, the lower the yield levels, and the greater the improvement in credit availability,” Dudley said.

He added that while the TALF has been off to a slow start, the central bank has been “encouraged by the results so far.”

Ben Bernanke also spoke in the morning, but unlike his speech on fiscal imbalance yesterday, the Federal Reserve Chairman’s declined to speak on monetary policy or the economic outlook.