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Jobless Claims

Released On 10/11/2012 8:30:00 AM For wk10/6, 2012 Prior Prior Revised Consensus Consensus Range Actual New Claims - Level 367 K 369 K 370 K 362 K to 375 K 339 K 4-week Moving Average - Level 375.00 K 375.50 K 364.00 K New Claims - Change 4 K 6 K -30 K

Highlights Big improvement in jobless claims may be tied in part to the week's seasonal adjustment and will in any case have to be confirmed by improvement in subsequent weeks. Claims fell to 339,000 in the October 6 week for a 30,000 decline that's the biggest since July. The 339,000 level is the best reading of the recovery! The four-week average is down 11,500 to 364,000 and is now trending more than 10,000 below the month-ago comparison in what points to improvement for both payroll growth and the unemployment rate. A possible issue skewing the number is the adjustment which expected a big swing for the first week of the quarter that didn't happen. Next week's report will help clear up this issue. Continuing claims continue to move lower, down 15,000 in data for the September 29 week to 3.273 million with the four-week average down 12,000 to 3.279 million. But the unemployment rate for insured workers isn't improving, holding at 2.6 percent where it's been since mid-March.

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International Trade

Released On 10/11/2012 8:30:00 AM For Aug, 2012 Prior Prior Revised Consensus Consensus Range Actual Trade Balance Level $-42.0 B $-42.5 B $-44.0 B $-46.5 B to $-41.2 B $-44.2 B

Highlights In August, the U.S. trade balance worsened and partially for the worse reason-exports declined, likely reflecting economic weakness in Europe and slower growth in Asia. Also, oil and petroleum product imports jumped on higher prices. The trade deficit expanded to $44.2 billion from $42.5 billion in July (originally $42.0 billion). This compares to market expectations of a trade gap of $44.0 billion. Exports fell 1.0 percent, following a 1.1 percent decrease in July. Imports slipped 0.1 percent after a 0.6 percent dip the prior month. The widening in the trade gap was led by the petroleum deficit which increased to $23.5 billion in August from $21.0 billion the month before. The non-petroleum goods shortfall narrowed to $35.3 billion from $36.3 billion in July. The services surplus slipped to $15.1 billion from $15.4 billion in July. On a not seasonally adjusted basis, the August figures showed surpluses, in billions of dollars, with Hong Kong $2.1 ($1.8 for July), Australia $1.8 ($2.1), Singapore $0.9 ($0.7), and Egypt $0.2 ($0.2) among others. Deficits were recorded, in billions of dollars, with China $28.7 ($29.4), European Union $11.7 ($12.0), OPEC $8.1 ($8.4), Japan $6.7 ($6.8), Germany $5.7 ($4.9), Mexico $4.5 ($5.0), Canada $2.4 ($2.1), Ireland $2.4 ($2.6), and Venezuela $2.2 ($1.4) among others. The decline in exports was again was led by a decline in industrial supplies but exports of nonmonetary gold rose modestly. Foods, feeds & beverages also posted a notable decrease with minor slippage seen in autos and consumer goods. Capital goods excluding autos posted a modest gain. Higher oil prices led the boost in imports but businesses appear to be concerned about consumer demand later this year as consumer goods declined. Industrial supplies jumped $1.5 billion with oil and petroleum products playing a key role. Businesses are remaining cautious about equipment investment as capital goods excluding autos slipped again. But a key concern likely is that imports of consumer goods declined, possibly indicating that businesses continue to worry about demand. The latest report continues to suggest that global trade is shrinking somewhat. This suggests soft economic growth ahead for the U.S. and other countries. However, there is potential for improvement in domestic demand in the U.S. after an unexpectedly sharp decline in initial jobless claims.

Market Consensus before announcement The U.S. international trade gap in July edged up but much less than expected-largely on a downward revision to June and a July narrowing in the petroleum deficit. The trade deficit widened slightly to $42.0 billion from $41.9 billion in June. But global trade shrank in the latest report. Exports declined 1.0 percent, following a 1.2 percent boost in June. Imports shrank 0.8 percent after a 1.5 percent fall in June. The slight increase in the trade gap was led by the non-petroleum goods gap which expanded to $35.8 billion from $34.2 billion in June. The petroleum deficit decreased to $20.9 billion in July from $22.5 billion the month before. The services surplus eased to $15.3 billion from $15.5 billion in June.

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Import and Export Prices

Released On 10/11/2012 8:30:00 AM For Sep, 2012 Prior Prior Revised Consensus Consensus Range Actual Export Prices - M/M change 0.9 % 1.0 % 0.4 % 0.1 % to 0.9 % 0.8 % Export Prices - Y/Y change -0.9 % -0.5 % Import Prices - M/M change 0.7 % 1.1 % 0.7 % 0.0 % to 2.2 % 1.1 % Import Prices - Y/Y change -2.2 % -0.6 %

Highlights Hikes are popping up in the import/export price report though overall pressure remains subdued. Import prices jumped 1.1 percent in September which is very sharp and which matches August's revised jump. Energy prices are the main factor behind this two month spike, but there's other pressures as well. Excluding petroleum, import prices rose 0.2 percent in September to end four straight months of decline for this key reading. Many readings show gains including for imported motor vehicles and imported capital goods. But consumer goods other than vehicles continue to show no pressure. The export side shows a 0.8 percent rise for a third straight gain. Pressure in September includes a third straight rise for agricultural exports but also includes increases for other exports including both consumer goods and motor vehicles. Despite the pressure spots, most year-on-year rates remain in the negative column. Total import prices are down 0.6 percent year-on-year with the ex-petroleum reading at minus 0.9 percent. Export prices are down a year-on-year 0.5 percent but year-on-year agricultural exports do show pressure, up 6.7 percent in reflection of the drought. Inflation hawks can use this report to find evidence, but only very early evidence, of price pressures. Producer prices will be posted tomorrow followed on Tuesday by consumer prices.

Market Consensus before announcement Import prices jumped 0.7 percent in August but it was mostly petroleum related. Import prices excluding petroleum fell 0.2 percent in August which was a 4th straight decline. Prices of imported finished goods continued to edge downward with consumer goods down 0.3 percent for a third straight decline and capital goods down 0.1 percent for the fourth decline in five months. These are the weakest readings of the recovery and point to a lack of pricing power for producers. Export prices, lifted by rising prices for agricultural products, jumped 0.9 percent in August on top of a revised 0.4 percent rise in July.

Definition Import price indexes are compiled for the prices of goods that are bought in the United States but produced abroad and export price indexes are developed for the prices of goods sold abroad but produced domestically. These prices indicate inflationary trends in internationally traded products.  Why Investors Care

Yearly changes in import and export prices reveal long term trends in inflation for tradable goods. Data Source: Haver Analytics

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an examination of the trading environment trends provides the basis for a preliminary forecast that the DJIA will find a base at 13,400 in the next few days and then rally up to 13,700 next week before declining to 13,100 to establish another base to make a run for 14,000 by year end.

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equity bottom finding may not stabilize for several more days and only when three of four near-term trend indicators are rising will a rebound by the market indices occur. Such a rebound is still likely to drive the DJIA up to 13,700 and the S&P500 index to 1,475, perhaps as early as next week.

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Down. 10,000 More to Go on $DJIA

Investors braced for a poor earnings season by shedding a painful 1% on Tuesday. Then after hours Alcoa posted a modest earnings beat on surprisingly robust sales. This has Alcoa and S&P futures pointing higher today.

Again, one company announcement does not an earnings season make. Yet given the global nature of Alcoa's business, then this is a very nice start to an earnings season with low expectations. The rest of the week has some large banks, but their earnings don't translate well to the majority of other company results.

Next week we will get a decent swatch of corporate bellwethers providing their results along with guidance for the future. I still like our odds to surprise to the upside and see Tuesday's dip as a buying opportunity. We'll know the truth soon enough with plenty of time to get more defensive if necessary.