Geithner Hangover: Markets Collapse


DOW down 200 despite better-than-expected retail sales.  Not helped by another awful week for jobs.

Ian Shepardson, High Frequency Economics:

January retail sales rose 1.0%, well above the consensus, -0.8%. Sales ex-autos also rose, up 0.9%, compared to consensus -0.4%. This is a big surprise, though the net rise in sales is less impressive than it looks because Dec and Nov were revised down by 0.3% each.

In Jan itself, both auto sales, up 1.6%, and core sales ex-autos gas and food, up 0.5%, were stronger than we expected. It is impossible to square these numbers with the unit auto sales data or the Redbook chain store numbers, so we expect either downward revisions or offsetting sharp declines in Feb.

The underlying trend in core is still clearly downwards – the Jan core gain has to be set against five straight declines averaging 1.1% – and there is no reason to expect any recovery soon.

The headline relief today is welcome but it is unlikely to last.

Jobless claims fell 8K to 623K, above the consensus 610K. Last week’s claims were revised up by 5K to 631K, a new cycle high. 

The 40K leap in claims last week looked unsustainably rapid but we had hoped for more than an 8K correction this week. The new data therefore reinforce the impression that the underlying pace of layoffs is continuing to rise rapidly, setting the scene for even bigger declines in payrolls.

The eight-week moving average now stands at 563K, up from 534K at the start of the year and just 430K in late August, before the Lehman blowup. The corporate bloodletting took a while to get started but it is now in full swing and we have no confidence that the peak in claims is near. To reach the peaks seen in the early 80s and mid-70s, population adjusted, claims need to breach 1M per week.