Mid-Morning Recap: Data is Encouraging, Market Response Limited

Stocks opened on par with yesterday’s close but have since climbed higher on encouraging data reports. A weekly labor report showed mixed results, a regional manufacturing report showed significant improvement, and the leading indicators index improved for the second straight month.

Ninety minutes into the session, the S&P 500 is up 0.61% to 916, led by gains in the financial sector. The Dow has made a similar 0.69% gain to 8556. However, the Nasdaq index is 0.23% lower at 1803. Also, the 10-year yield is up two-tenths to 3.76%.

The day began with a mixed Jobless Claims report an hour before the opening bell. In the week ending June 13, 608,000 Americans filed for initial unemployment benefits, more than the prior week’s revised figure of 605k. 

That marks the 20th consecutive week that initial claims have exceeded 600k. However, markets put more stock in the fact that continuing claims fell 148k to 6.687 million, marking the first dip since January.

"This is still consistent with falling payrolls, but the point here is that the post-Lehman panic among employers appears to have subsided," said Ian Shepherdson from High Frequency Economics.

A lukewarm start in the markets heated up after 10 am, when the Philadelphia branch of the Federal Reserve reported that manufacturing conditions in the region were deteriorating at much slower pace in June than in May. The index moved up to -2.2 from a previous -22.6, led by improvement in new orders, shipments, and the 6-month outlook.

The employment component also improved 5 points, but at -21.8 it is still far from showing stabilization.

The improvement in Philadelphia stands in contrast to the downward slide seen in Monday’s Empire State survey, putting increased emphasis on the direction of the Chicago survey to be released June 30.

Released at the same time, Leading Indicators gained 1.2% in May, following up on a 1.1% gain in April. Together, the back-t0-back increases mark the biggest increase in leading indicators since late 2001.

“It would seem that the economy continues to work through the recessionary headwinds, though there is still a considerable amount of obstacles left to be tackled before the U.S. economy is in safe waters again,” said TD strategist Ian Pollick.  

Outside of data news, Treasury Secretary Timothy Geithner testified to the Senate Banking Committee at 9:30. The Obama administration is fighting to get yesterday’s proposal for regulation overhaul through the legislative process as quickly as possible.

“Every financial crisis of the last generation has sparked some effort at reform, but past efforts have begun too late, after the will to act has subsided,” Geithner said, defending the broad reform. “We cannot let that happen this time.”