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US stock market daily report (January 26, 2012, Thursday)

Contributed by Millennium Traders

By Millennium Traders

U.S. Labor Department reported new applications for unemployment benefits rose sharply last week, but initials claims remain at a level usually associated with a modest improvement in U.S. hiring trends. U.S. jobless claims climbed by 21,000 to a seasonally adjusted 377,000 in the week ended January 21 and jobless claims from two weeks ago were revised up by 4,000. The number of jobless claims frequently gyrate during January despite government efforts to adjust for seasonal factors owing to the end of temporary jobs created during the holiday season. For the first week of January, jobless claims totaled 402,000 and sank to 356,000 two weeks ago before bouncing back up again last week with the average of four-week claims fell slightly, down 2,500 to 377,500. The monthly average jobless claims has shown little change over the past six weeks, but recent levels suggest a declining number of layoffs in broader economy. The current pace of hiring, approximately 150,000 jobs a month, is barely able to absorb the natural increase in the nation’s labor force. U.S. jobless claims generally reflect how many people lose their jobs which means that the U.S. should be able to add jobs at a faster clip even if companies hire at a rate no faster than last year. However, this number falls well short of what’s needed to put millions of Americans back to work and drive down unemployment. The Labor Department reported continuing claims increased by 88,000 to a seasonally adjusted 3.55 million in the week ended January 14 - continuing claims are reported with a one-week lag. Nearly 7.64 million people received some type of state or federal benefit in the week ended January 7, down 188,612 from the prior week with total claims reported with a two-week lag.

Commerce Department estimated that U.S. new home sales fell unexpectedly in December with a 2.2% decrease in new-home sales to a seasonally adjusted annual rate of 307,000. The sales of new homes fell 6.2% to a record low 302,000 for the year 2011. The supply of new homes fell 0.1% to 157,000 during December with supply in relation to sales rising slightly to 6.1 months in December from 6.0 months during November. Median sales prices for new homes has fallen 12.8% in the past year to $210,300, striking lowest level seen since October 2010.

After data showed improvement in the housing market, Freddie Mac reported rates on the 30-year fixed-rate mortgage jumped this week. Rates on the 30-year fixed-rate mortgage averaged 3.98% for the week ending January 26, up from 3.88% last week and averaged 4.8% a year ago. Fifteen-year fixed-rate mortgages also rose, averaging 3.24%, up from 3.17% last week compared to average rates at 4.09% 2011. Adjustable-rate mortgages showed less movement this week with the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaging 2.85%, up from 2.82% last week compared with the ARM average of 3.7% a year ago. The 1-year Treasury-indexed ARMs averaged 2.74% this week, unchanged from last week and down from 3.26% a year ago. “Fixed mortgage rates ticked up this week as the housing market ended 2011 on a high note,” said Frank Nothaft, vice president and chief economist of Freddie Mac, in a news release. “New construction of one-family homes rose 4.4% in December to an annualized rate of 470,000, the most since April 2010. Existing-home sales increased 5% at the end of the year to 4.61 million houses, the largest amount since May 2010.”

Commerce Department estimated today that stronger orders for airplanes and machinery translated into a better-than-expected 3.0% increase in durable-goods orders in December - striking third straight increase for durable-goods orders. During 2011, the level of new orders for big-ticket items rose 10% with Chicago-based Boeing reporting that they received 287 orders in December, up from 96 during November. Institute for Supply Management, a trade group of purchasing executives, reported its index of manufacturing activity hit its highest level in six months during December. Durable goods are big-ticket items such as cars, planes, appliances, furniture and computers designed to last at least three years. U.S. Government data showed orders for nondefense capital equipment goods excluding aircraft, often called 'core orders' rebounded 2.9% in December, a reversal from decreases of 1.2% in November and 0.9% during October. These core capital goods orders are considered the best gauge of capital spending by businesses with core capital goods orders up 10.0% during 2011. Shipments of core capital goods which is a figure that feeds directly into calculations of gross domestic product, rose 2.9% in December. Most sectors reported better bookings in December compared with November and specifically, orders for civilian aircraft soared 18.9%, machinery rose 6.0% and primary metals rose 5.1%. Fabricated metals, defense aircraft and electrical equipment all showed declining orders for December. Durable orders rose 2.1% in December excluding a 5.5% increase for transportation equipment marking the fourth straight such gain. Excluding defense, orders rose 3.5% in December, easing back from a 4.6% jump seen in November. Shipments of durable goods rose 2.1% in December compared to gain of 7.8% in 2011 while inventories of durable goods rose 0.3% and are higher by 10.5% from 2010.

Defense Secretary Leon Panetta reported today that the White House wants $525 billion for the basic operating costs to run the military in the fiscal year that starts October. The number is down from $531 billion in current year, as well as $88.4 billion for the Afghanistan campaign, compared to $115 billion in war costs this year. These cuts exclude any forced reduction as a result of the super-committee's failure to agree to $1.2 trillion in spending cuts.