Update 6/13/14

Jobless Claims

Jobless Claims rose this week to 317,000, which was higher than the anticipated 309,000 economists projected.  The four-week average rose on these numbers, to 315,250.  The four-week average is still down when compared to the average at this time last month, which shows that the labor market has slightly improved.  Our opinion is that we will continue to see steady improvements and this week’s miss, as well as the rise in the four-week average, are not a cause for concern, as volatility in the labor market can occur.

Consumer Comfort Index Increases

Consumer confidence climbed to the highest level in five weeks as Americans’ views of the economy improved.  The Bloomberg Consumer Comfort Index rose to 35.5 in the period ended June 8, compared to 35.1 the previous week. A measure of the state of the economy increased to a six-week high, while measures of personal finances and buying climate also advanced.  We anticipate the recent gains in confidence should help sustain consumer spending going into the second half of the year.

Eric Cantor defeated in the primaries

House Majority Leader Eric Cantor was defeated in the Virginia Republican primary elections on Tuesday, making him the first-ever majority leader to lose in a primary election.  This was certainly shocking, as Cantor was widely believed to be in line to be the next Speaker of the House.  After the defeat, Cantor announced that he would step down from his position as House Majority Leader, effective July 31st.  He will carry out the remainder of his term in the House, however.  This essentially kills the immigration reform bill that Cantor took the lead on, although it seemed unlikely to pass anyhow.  Cantor is said to be a “friend” to Wall Street, as he has been on their side for several issues in the past and it remains to be seen how his defeat will impact the financial sector, if at all.

Intel sees increased demand for PCs

Intel (INTC) rose to a 10-year high today, as the semiconductor chip maker raised its revenue outlook for the year, citing stronger than expected demand for business PCs.  While this is due, in part, to Microsoft ending its technical support for Windows XP, thus increasing the demand for newer PCs, it also speaks to the beginning of the “corporate refresh cycle” we have been talking about for some time now.  Businesses have been sitting on cash and have been reluctant to hire or to spend money.  But this change may be starting to pick up steam as companies begin upgrading their technology.  It will be interesting to see if business confidence and increased hiring follows here in the next few months.

FOMC Meeting Announcement

Looking ahead to next week, the Federal Open Market Committee (FOMC) will announce their latest interest rate policy on Wednesday.  This is always a very important and influential announcement from a capital markets standpoint.  Currently, the market seems to believe that the FOMC will leave the Fed Funds Rate targeted between zero and 0.25%.  However, since the Federal Reserve began tapering their bond purchases, the thought of an increase in the Fed Funds Rate has loomed in the back of investors’ minds.  It will be interesting to hear what Fed Chair Janet Yellen has to say about this, in only her second press conference.  We will certainly monitor this development.

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