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Optimism on Greek Bonds, U.S. Jobs

Sheraz Mian

This morning’s favorable news flow should help stocks sustain the positive momentum from Wednesday. Greece’s private sector bond swap, whose uncertain fate had gripped the markets in recent days, appears to be attracting enough participation to make the deal binding on all bondholders.

The details of the swap will come out Friday morning, but growing optimism about the deal is helping bring down the yields on Italian and Spanish government bonds, which had started creeping back up in recent days.

Friday morning not only clears up the air on the Greek situation, but will also likely confirm the recent improving trend in the U.S. labor market though the February non-farm payroll report. This morning’s modestly weaker-than-expected Initial Jobless Claims report nevertheless confirms the improving jobs picture, helping build expectations of a strong labor reading tomorrow. The expectation is that a favorable labor market read on Friday will serve as the key catalyst to push stocks above resistance levels.

Initial Jobless Claims came in a tad weaker than expected last week – up 8K to 362K vs. expectations of a lower rise. The prior week’s tally was modestly revised upwards to 354K from the originally reported 353K. The four-week average, which smoothes out the week-to-week fluctuation, moved up by a mere 250 to 355K.

This week’s modest ‘miss’ notwithstanding, the overall trend in the labor market has consistently been in favorable direction lately. It will be interesting to see if Friday’s jobs report will further confirm this trend.

On the earnings front, Williams-Sonoma (WSM), the home furnishings retailer, beat earnings and revenue expectations and guided higher. Results at truck maker Navistar (NAV) and retailer Stein Mart (SMRT) came short of expectations.

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