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US Retailers Gain: Strong Earnings and Declining Jobless Claims

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Retailers gain though jobless claims increase in the US

Retailers like Netflix (NFLX), Coach (COH), and Hasbro (HAS) gained 18.21%, 2.99%, and 1.90%, respectively, despite a rise in jobless claims in the US for the week ending April 11, 2015. An increase in jobless claims indicates declining household income. This means lower consumer spending. Generally, this doesn’t bode well for retailers.

However, strong earnings reports came out for retailers. This seems to have kept investor sentiments high for retail firms. For example, on April 15, Netflix reported a strong $0.77 EPS (earnings per share) against the expected $0.67.

The Consumer Discretionary Select Sector SPDR ETF (XLY) gained 0.20%, although the SPDR S&P 500 ETF (SPY) was down 0.03%.

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Jobless claims were at 294,000

For the week ending April 11, there were 294,000 new claims for unemployment insurance—according to a U.S. Department of Labor report released on Thursday, April 16. The figure came in far above the consensus estimate of about 280,000 claims. It was up from the previous week’s claim figure of 282,000.

Declining jobless claims benefit the Consumer Discretionary sector

Initial jobless claims show the number of individuals who have filed for unemployment insurance for the first time. The U.S. Department of Labor’s Employment and Training Administration comes out with this weekly report. The report is a good indicator for labor market conditions in the US (SPY) (IVV). A decrease in jobless claims bodes well for the labor market. It’s also good for the economy’s general well-being. It boosts consumer spending. It’s good news for the Consumer Discretionary sector.

The above chart shows the trend in initial jobless claims and XLY’s price movement. Since the 2009 recession, the US economy saw a declining trend in unemployment insurance claims. As a result, it saw a gain in consumer spending. This is reflected in XLY’s upward trend.

Let’s take a look at some of the inflation numbers that were released in the Eurozone.

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