Although generally ignored this morning in favor of a let’s wait and see what the BLS gives us tomorrow on the labor market, the market saw some economic indicators today worth looking at.

First, the Initial Claims came in up +16K (5%) from the prior week to 326K, while Continuing Claims jumped 22K to 2.850 million.

The increases were no surprise given the large drops experienced last week (it’s an ongoing problem with the seasonal adjustment process).

Initial claims vs S&P 500 differentials

Overall, the increases today and the slight decline in the S&P 500 (INDEXSP:.INX) over the past week were not enough to push the Initial Claims/S&P 500 differential from its all-time high, ending March at 1540, down 4 from the prior week (second chart is the source of the Differential).

differential

initial claims sandp500

In addition to the Initial and Continuing Claims numbers, the market also digested Challenger Job Cuts and the ISM Services Index.

The Challenger Job Cuts figure declined to 34,399, a 7K decline from February’s number.

Interestingly, in the initial years of the Challenger Job Cuts number, it didn’t correlate well with the performance of the equity markets.  That’s changed over the past few years, with a peaking in the Job Cuts figure generally a leading indicator of improving equities and a bottoming of the Jobs Cuts number generally indicative of a deteriorating equity market.

As of now, the Challenger figure appears to be close to bottoming.

challenger Initial Claims

Increase in ISM Services Index

Perhaps the most indicative indicator of them all, the ISM Services Index increased to 53.1, a reasonably strong improvement from the 51.6 of the prior month.  Although improved, the Services Index missed the market’s target of 53.5.

The ISM Services Index also continues to be below the 2013 peaks.

ism Initial Claims

If you were asked: How well do the ISM Mfg. and ISM Services indices forecast the performance of the S&P 500 (INDEXSP:.INX) next month, what would you say?  Which one – Manufacturing or Services – would you say predicts the market better?

If you don’t know, here’s the relationship, with the ISM Mfg. and ISM Services indices lagged one month to show the predictive power.

The first chart shows the relationship from 1946 to today.  Including all the years makes the chart look bunched up, but one thing is clear by looking at the red orthogonal regression lines – both are positively correlated, which bodes well for April’s S&P 500 performance.

How does it change across time?

The video following the scatterplot chart shows this, with the bottom of the video on the left containing the starting month (starts in January 1960) and the bottom of the video on the right showing the end month (March 2014).

Interestingly, the relationship generally holds throughout.

scatterplot ism Initial Claims

ISMs and the S&P 500