Precariously Positioned U.S. Economy Warrants Heightened Scrutiny of Jobless Claims, Says S&P Lookout Report

Biweekly Research Note from S&P Valuation and Risk Strategies Delivers Institutional Market View of Fundamentals, Fixed-Income, Equities, Derivatives and Capital Markets

Sep 23, 2011, 14:19 ET from S&P Capital IQ

NEW YORK, Sept. 23, 2011 /PRNewswire/ -- Against a backdrop of healthier economic indicators such as retail sales, industrial production, and durable goods orders, S&P Valuations and Risk Strategies today suggested that U.S. unemployment insurance data may offer some additional hope that the U.S. could avoid recession.  This research is published in the Lookout Report for September 23, 2011, a biweekly research note that draws upon S&P's unique analytics assets, including Capital IQ, S&P Indices, S&P Leveraged Commentary and Data, S&P Equity Research and S&P Valuation and Risk Strategies Research.  The report, which also features market insights and commentary on corporate earnings, leveraged loan trends, commodity index activity and more, is available here.

U.S. unemployment insurance data are mainly reported in two related series: weekly initial jobless claims that newly displaced workers file, and the continuing claims data of all individuals that currently receive unemployment benefits in standard state-run programs. Despite recent volatility in these two series, S&P Valuation and Risk Strategies analysts believe these indicators may be in the process of aligning and correcting. From this perspective, the most recently released jobless data is somewhat encouraging

Following are additional highlights in the September 23, 2011 edition of the Lookout Report:

S&P Index Equity Commentary: Buybacks Have Returned To The $100 Billion Quarterly Level, But Don't Look For Any Earnings Per Share Help

At this point, companies are continuing to use buybacks for dividend reinvestment programs and to prevent earnings dilution from employee options. Few companies are venturing outside of the box to purchase additional shares, as became the common practice in late 2005 through mid-2007. We haven't seen any boost in earnings per share as a result of reduced share count, and at this point in the third quarter, we don't expect any increase.

Leveraged Commentary And Data: Loan Managers Cast A Wary Eye On 2013 In LCD's Latest Default Survey

The loan default rate is running at a microscopic 0.09% year to date through Sept. 16, but loan managers are wary when looking to 2012 and particularly 2013, according to LCD's latest quarterly buyside straw poll conducted in mid-September.

R2P Corporate Bond Monitor

Despite economic tumult, risk-reward profiles--as measured by average Risk-to-Price (R2P) scores--improved overall since the beginning of the month. Only a few sectors in Europe deteriorated, such as information technology, energy, and telecommunication services.

Market Derived Signal Commentary: Italy's Downgrade Is Costly For The CDS

The cost to purchase protection on Italy's five-year credit default swap (CDS) increased by 10% to 448 basis points (bps) on Monday after Standard & Poor's Ratings Services lowered its rating on the country to 'A' with a negative outlook from 'A+'. We think there is a strong possibility that the CDS will continue to expand, raising the risk of default.

Capital Market Commentary: The Third Quarter Has Been Marked By Cancellations And Caution

According to data retrieved from Capital IQ, just 17 IPOs have been priced on major U.S. exchanges in the third quarter. Still, not all developments have been pessimistic. A steady stream of filings has kept the IPO backlog at multi-year highs, and as earnings season approaches, many newly publicly traded companies will be reporting their recent quarterly results.

Quantitative View: Return Correlation And Dispersion Mean Tough Times For Active Managers

The financial market's fixation on macro risks has led to a correlation of stock returns within the S&P 500 Index of 35%, a level not seen since the 2008 financial crisis, placing the current relationship in the 83rd percentile historically.

The Lookout Report provides cross-market and cross-asset class views of current data and forward-looking insights from leading S&P market specialists.  Key areas of focus include aggregated corporate earnings, market and credit risk evaluation, capital markets activity, index investing and proprietary data and analytics.  The report previews the issues most likely to drive market expectations or cause a market disturbance in the weeks ahead.   It can be accessed on S&, the S&P Global Credit Portal and Capital IQ.

About S&P Capital IQ

S&P Capital IQ, a brand of the McGraw-Hill Companies (NYSE: MHP), is a leading provider of multi-asset class data, research and analytics to institutional investors, investment advisors and wealth managers around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as Capital IQ, Global Credit Portal and MarketScope Advisor desktops; enterprise solutions such as S&P Securities Evaluations, Global Data Solutions, and Compustat; and research offerings including Leveraged Commentary & Data, Valuation & Risk Strategies and S&P Equity Research, S&P Capital IQ sharpens financial intelligence into the wisdom today's investors need.

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