Focus Shifts to U.S. Economy

Unless we see a material negative turn of events in Japan and/or the Middle East today, the market’s focus should firmly remain on domestic matters. We have a string of econommic reports coming out today, touching on almost every aspect of the U.S. economic recovery.

We even have pre-market earnings announcement from FedEx Corp., an economically sensitive bellwether. FedEx’s results were on the softish side, reflecting the inclement weather in parts of the quarter, but guidance appears to be positive.

Before the market’s open, we got fresh positive readings on the labor market and an in-line report on consusmer prices.

Weekly Jobless Claims fell, bucking last week’s report, with the number coming in at 385,000. Even the four-week average, a more stable number, fell to about 386,000. This confirms the positive momentum that we have been seeing in the labor market.

The CPI report showed what we saw in the PPI numbers a few days back that pricing pressures are not seeping into the core measure. And it is this core measure, which strips out food and energy costs, that the Fed keeps an eye on.

Later in the day, we get reports about industrial production and leading indicators. This shift back to domestic matters should be a net positive, helping the market reverse some of the losses from the last few days.

Keep in mind though that we still don’t have a definitive read on Japan’s smoldering nuclear reactors. We are in uncharted territory on the nuclear reactors issue and this air of uncertainty is a huge negative for the stock market. Also keep in mind that the picture in the Middle East has not exactly settled down while the market’s attention had shifted to Japan in the last few days.

Uncertainties remain about the world beyond our shores, but the domestic economic picture continues to improve. And in the final analysis, it is this favorable trend in the domestic economic scene that will be driving the stock market.

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