It was only a modest rally, but as we suggested earlier, it should have been heartening if you’re of the bullish persuasion.
Mike O’Rourke of BTIG has some good thoughts:
The highlight of the session was the weekly Initial Jobless Claims data today, which further reinforced the assertion we were making throughout the claims uptick in August – that it was seasonal adjustment factors distorting the readings and not the commencement of a new uptrend in Initial Claims. If the current trends remain intact as we expect they will, during the next couple of weeks the readings should be around the current levels with gradual improvements. If claims follow a similar patter to last year, claims should be testing or breaking below the 400,000 level before year end. We are also very much encouraged by the notable efforts in the market to dismiss this number today. We suspect it is a sign that more people will be caught out of position when the data continues to improve.
We’re pretty sure that he’s referring to the spin surrounding there not being hard data in 9 states (which was almost certainly overblown)
Finally, the day’s real speed bump, which at other points in 2010 would have turned into a brick wall, was the Deutsche Bank story reported by Bloomberg that the bank was “mulling” a €9 Billion share offering. For an institution with a €29 Billion market capitalisation, that is a big offering. This was another situation where somebody somewhere said something they should not have said. Josef Ackermann should be looking for someone’s head. The problem with a story like this leaking in the current environment is it quickly raises the specter that the company needs to raise capital due to its southern European sovereign debt exposure. It is like blood in the water and the sharks will start circling. It is another situation where the relevant party has lost control of its message. Deutsche needs to quickly get out there and disclose its true intentions if it wants to attempt to maintain control of the situation. If there is anything that should have been learned from 2008, it is that if a financial institution needs to do an equity offering, there should be no “mulling.” They should get it done as quickly as possible. If Deutsche management is truly “mulling” an offering at current share prices, investors will quickly question their credibility considering the shares were 15% higher and within 7% of a 52 week high a month ago. It is reminiscent of Citigroup passing on the opportunity to sell shares at the $4.50 level last fall only to help fuel selling from $4 to a $3.15 as they tried to get approval and put the deal together in December.