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The Best of Kass

Stocks in this article: YHOO

NEW YORK ( TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among his posts this past week, Kass explained why Thursday's economic data were mostly disappointing; noted a significant analyst change on Yahoo!; and identified what he thinks has been buoying stocks recently.

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Data Review
Originally published on Thursday, Sept. 27 at 10:33 a.m. EDT.

  • Mostly disappointing.
  • Let's look at this morning's economic data, most of which was disappointing and signals subpar economic growth ahead (at best)/stall speed risk (at worst).

    Bottom line: Data were consistent with a slight increase in the rate of real GDP growth from the punk +1.3% revised second-quarter 2012 reading. As I have written, this should produce a challenging last-half earnings picture, which will likely restrain share buybacks and dividend increases.

    Second-quarter 2012 real GDP was revised lower by 0.4%, to +1.3%, with consumer spending, fixed nonresidential investment -- while consumer confidence is improving, we can't say that for business confidence as tax and fiscal cliff uncertainty looms coupled with the mess in Europe -- and inventory accumulation (drought induced but should reverse in the fourth quarter) responsible for the revisions.

    The August durable goods report was weak and reflects the aforementioned drop in business confidence. Down 13% month over month -- expectations were for -5% and July was +3.3. Most of the disappointment was in the volatile private aircraft sector. Adjusted for transportation items, -1.6% compared to consensus exptecations of +0.2%. Core capital goods orders (defined as orders minus defense and aircraft) rose by +1.1%, though July was revised down by 2%, to -5.2%. Again, this indicated that the corporate sector is uncertain and unwilling to move much on cap spending and hirings.

    The one shining moment this morning was initial jobless claims, which, at 359,000, were 16,000 less than consensus and 26,000 less than the prior week. This is the best reading since midsummer. Continuing claims were also positive, continuing a four-week drop.

    The claims number likely supports monthly payroll increases of 130,000-150,000, which would, if reached, underpin 2% real GDP but would not be enough to lower the unemployment rate.

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