For a week without much economic news, it certainly was eventful. First the Cisco CEO sounded a cautious note in his earnings conference call and the stock dropped close to 10%. Next, Jamie Dimon of JPMorgan Chase revealed that the bank lost $2 billion with a "B" in its proprietary trading program. This is irony at its best given that this is the sort of trading that Dodd-Frank was designed to curtail and Mr. Dimon has been telling anyone who will listen doesn't need to be regulated. In the event, the trading losses caused a rather large loss of market capitilization for the firm.
In economic news, the number of Americans applying for jobless benefits declined by 1,000 to a seasonally adjusted 367,000, and consumer confidence ticked up a point. The tick-up in confidence coincides with the increase in the use of credit by consumers we mentioned last week. As we mentioned last week, we are hopeful that the recent slowdown in hiring will not mimic the previous two years, and another bright spot to support our hope comes from the world of small and medium businesses.
There is a noticeable improvement in sentiment in small business. This is notable because this sector accounts for a larger share of the economy than most people realize, with small firms (1-49 employees) accounting for roughly 45% of private employment and medium firms (50-499 employees) an addtional 39%. The previous two years' "growth scares" coincided with faltering small business confidence, and so far this year, small business sentiment remains higher than in the previous two years. Sentiment in this sector is measured by the National Federation of Independent Business (NFIB), and their latest survey showed overall sentiment returning to a post-recession high of 94.5. This level is similar to where it was before hiring faltered in 2010 and 2011 at this time, thus we will be monitoring this survey quite closely.
Next week, in contrast to this week, is packed with economic news. Along with earnings reports from major retailers, we will be watching Tuesday's reports on the Consumer Price Index and Retail Sales; Wednesdays reports on Housing Starts and Industrial Production, as well as the FOMC Meeting Minutes; and Thursday's Jobless Claims report.