Experts Talk Bernanke Day 2, Durable Goods, Jobless Claims

[guest]

What Wall Street economists and strategists had to say about key developments on Feb. 25


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[clemens]

Very interesting reading...


Michael Wallace and Kim Rupert, Action Economics Fed Boss Ben Bernanke's February .


Twenty-five Senate speech was nearly matching to the House version yesterday, leaving the targeting on the successive round of QA for any change of tone on the policy and industrial outlook. [D]ownsizing the money service sector to a more acceptable size may be one objective of the regulatory reform process, related the Federal Agency chief. Winning few points with the Street and beleaguered homebuilders, he noted the sector had become too enormous, with home construction, relative to the economy. He remains doubtful whether the economy will grow quick enough to lower the jobless rate.


On inflation, Bernanke isn't searching for a serious rise in the near or medium term. The weakness in the economy and strength in productiveness have served to dampen wage costs, which in turn have limited firms' pricing. In the meantime , shelter costs are anticipated to stay subdued, while energy costs are also not posing an inflation threat.


He claimed it is important for Congress to find answers to the shortfall problem. Turning to the economic outlook, Bernanke expounded holes on the order of 4% to 7% weren't viable, but 2.5-3.0% was better. Echoing yesterday's affidavit, he claimed Congress will need an economic plan for the subsequent ten to twenty years to calm the bond market.


He also disagreed for some clearness on housing agencies Fannie Mae and Freddie Mac.


Ted Wieseman, Morgan Stanley Overall U.S. Sturdy products orders lifted 3.0% in Jan , but just because of a spike in the unpredictable civilian aircraft class ( +126% ) and a boost in the just about as unsteady defense capital products grouping ( +19% ). Excluding aircraft and defense, orders slid one percent, with bigger weakness in core orders. Core capital products orders were robust late last year but saw a partial correction in January, with the swings driven by major volatility in machinery, which appears to have developed an increasingly asserted problem during the past year with seasonal adjustment round the ends of quarters. Capital products cargos were also weaker than anticipated in Jan . Strength into December still points towards a solid gain in business investment in quarter 1 but less than we were expecting before this report. With a partial positive offset from a flattening out in inventories, we now see Q1 GDP expansion running at +2.2% rather than +2.5%. David Resler, Nomura Instruments 1st unwaged claims rose to 496,000 in the week ending February . Twenty, from 474,000 formerly. Understanding forecasts had expected a decline to 460,000. On a non-seasonally altered basis, first unemployed claims have gradually dropped for 3 sequential weeks. the seasonal factors for this period have a hump-shaped pattern, expecting a jump in claims in the 1st week of Feb and sharply lower claims afterward. Applied to this year's unadjusted claims, these seasonal factors caused the seasonally changed level of claims to fall sharply in the 1st week of Feb and rise thereafter. Looking past these seasonal adjustment distortions, we suspect the trend in primary unemployed claims is flat at about 480,000. Though better than 500k and rising, this level of claims is still inconsistent with private-sector work expansion, in our perspective.


We suspect today's report adds drawback risk to our forecast for nonfarm payroll work for Feb . Scott Davies, Brown Siblings Harriman We reiterate our tactically bearish outlook for the SP 5 hundred and call for a ten percent to 16% correction to completed before midyear. For tactical backers we promote selling into any trading rallies, with overhead resistance at 1100, and more significantly from the index's 50-day moving average at 1110 providing ideal points toward initiate short positions.


On the disadvantage, last week's low of 1045 remains a key near-term level for the bulls to protect, before tests of further support in the 1020-1040 range. Given historic case law, we suspect the existing pullback is much more likely to be in its early stages, with more rounds of backing and filling to come before the SP five hundred ultimately finding a floor in our required range of 966-1036, probably going to in 2Q10.