Let The Spin Begin

Daily State of the Markets 
Friday Morning – October 8, 2010  

Days like Thursday are tough to deal with – and easy to forget – because in all honesty, they don’t mean much. Sure, there were some inputs that are worthy of mention and analysis. But just about everyone, everywhere basically spent the day waiting for this morning’s all-important report on Nonfarm Payrolls.

However, with the report now upon us, it will be very interesting to see how the markets will react. In my humble opinion, this is a spin doctor’s dream as almost any number out of this report can be construed as good – or bad.

Let’s see, a good jobs report (which most view as highly unlikely) would, at first blush, appear to be a positive for stocks. But then again, with everyone now hoping the Fed will launch the QE II sometime soon, a good report might be considered bad for the market. Why would good news be bad, you ask? In short because if the report is too good, traders might worry that there will be no reason for the Fed to get busy after all. And then, if the report is bad, it could be good for stocks due to the heightened expectations for quantitative easing. But on the other hand, bad news could be bad for the market because it might mean things are so weak that the Fed won’t be able to save the patient. See what I mean?

Before we get to the jobs data, we should take at least a moment to review the happenings of Thursday. After all, the stated objective of the State of the Markets report is to identify the drivers of the market during the session. So… While the results were largely overshadowed by all the talk about the Fed and what they might do next, it is worth noting that the nation’s retailers had a decent month in September. Of the retailers reporting same-store sales comparisons, 68% came in above expectations, which was one of the best showings since last winter (when the comparisons were easy).

And returning to the topic du jour, after a disappointing report from ADP on the state of private sector job market, Thursday’s report on weekly jobless claims wasn’t half bad. Initial claims for unemployment insurance fell to 445K, which was better than expectations and marked the fourth decline in the last five weeks. However, the positive spin ends there as the absolute level of claims remains uncomfortably high as far as most economists are concerned.

So, what should we expect out of this morning’s Big Kahuna of economic data? The consensus expectations are for nonfarm payrolls to fall in the vicinity of 10,000 due to the loss of temporary government jobs. This means that the private sector should show job gains in the vicinity of 67K. While this could be seen as modestly encouraging, analysts also expect the unemployment rate to rise to 9.7% from 9.6%.

But enough of all this pre-game analysis, let’s get to the numbers… The Labor Department reported that Nonfarm Payrolls, which is arguably the most important gauge of the state of the economy at the present time, fell in the month of September by 95,000. This was below the consensus estimates for a decrease of 7,000. August payrolls were revised lower to -57K from -54K. August Private Payrolls revised higher to +96K from +67K. The nation’s Unemployment Rate held steady at 9.6%, which was actually below the expectations for a reading of 9.7%.

It is also worth noting that Private Sector job growth has been fairly steady this year withan average of 96K jobs added per month. Although the totals over the past three months has been lower.

Futures have moved modestly higher in reaction as the Fed’s James Bullard called the report “pretty much in line” with the Fed’s expectations. Let the spin begin…

Finally, best of luck on this Friday and be sure to enjoy the weekend!

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell…

• Major Foreign Markets:
  • Australia: -0.12%
  • Shanghai: +3.13%
  • Hong Kong: +0.26%
  • Japan: -0.99%
  • France: -0.07%
  • Germany: -0.07%
  • London: -0.54%

   

• Crude Oil Futures: – $0.85 to $80.82
• Gold: – $4.60 to $1330.40
• Dollar: lower against the Yen and Pound, higher vs Euro
• 10-Year Bond Yield: Currently trading at 2.374%

   

• Stocks Futures Ahead of Open in U.S. (relative to fair value): 
  • S&P 500: +1.34
  • Dow Jones Industrial Average: +18
  • NASDAQ Composite: +8.12  

Wall Street Research Summary

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