Economic data has remained in line with estimates Thursday, with oil Data on jobless claims, GDP and corporate profits were all released this morning. Oil prices were a negative for stocks Thursday with crude moving back above $107 a barrel. Though the worst might be over for the stock market and economy, there still are plenty of problems that are keeping traders uneasy.

Jobless claims for the week ending March 22 fell by 9,000, but remain elevated at a level of 366,000. This put the four-week moving average at 358,000, which points to continued softness in the labor market. Remember, the past two months have shown declines in nonfarm payrolls. Continuing claims for the prior week fell slightly to a level of 2.845 million, but remain above the 2.8 million level seen throughout most of February.

The final revision to fourth-quarter GDP was released this morning, coming out unchanged at growth of 0.6 percent. Though anemic, at least it wasn’t negative growth and the GDP price index was revised lower by 3-tenths to 2.4 percent. Of course, this data is dated so it hasn’t much of an impact on the stock markets. Overall, the PCE index rose 3.9 percent during 2007 with the core PCE up 2.5 percent. Both were lower than initial estimates by 2-tenths.

Stocks are ultimately priced based on the profits made by corporate America. In February, after tax profits, as measured by the Bureau of Labor Statistics [BLS], showed a year on year gain of 6.6 percent. In the fourth quarter, profits were up 4.4 percent on an annualized basis, well below the 8.4 percent rate in the third quarter.

Oil prices moved higher once again Thursday, rising $1.26 a barrel to $107.16 for May delivery. Prices moved higher Wednesday following a flat reading for inventory builds during the week. Today, crude continued higher on worries about tensions in Iraq. A second oil pipeline was bombed in Iraq Thursday. Of course, high energy prices have combined with a tight credit market and falling home prices to slow consumer spending and this is a definite worry going forward. The Fed has done a lot to try to spur economic growth and increase liquidity and this should help offset declining consumer sentiment.

Friday’s calendar includes data on consumer sentiment as measured by the University of Michigan. Estimates are for this sentiment index to fall slightly to a level of 70.0 in March from 70.8 in February. The mid-month reading came in at 70.5, but the Conference Board report on Wednesday fell much more than anticipated, raising concerns about Friday’s data.

The other report due out Friday is the personal income and spending data. Personal incomes in February should show a gain of 0.3 percent with consumer spending up just 0.1 percent. The core PCE price index is expected to show a gain of 0.2 percent. Spending could slow to the point where real spending, adjusted for inflation, is negative for the first time from quarter to quarter in 17 years. Fed fund futures are still pricing in more rate cuts at the April meeting, but a 25-basis point cut is the most probable at the moment, showing even odds.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site