All About Jobs (Again) – Or Is It?

Daily State of the Markets 
Friday Morning – January 7, 2010  

In all honesty, spending a lot of time reviewing Thursday’s market action seems less than productive. After all, nothing much happened as it seems that everyone, everywhere is simply waiting on this morning’s all-important Big Kahuna of economic data – the Nonfarm Payrolls report.

The consensus thinking seems to be that the December jobs report will dictate the near-term direction of the market. While I too believe that the jobs report is more than likely to be the catalyst for Friday’s trading, it is worth noting that the bears once again had an opportunity on Thursday and once again, couldn’t do much with it.

Before we get to the Nonfarm Payroll totals and the Unemployment Rate, think about the following. After a spirited romp in December, during which time the bears were able to produce just four down days, most everyone will agree that the market is overbought from a short-term perspective. And when reviewing the investor sentiment data it becomes quite clear that the optimism has reached extreme levels. Next, history shows that the market tends to move sideways-to-dwon for much of January. Therefore, it would appear that the table has been set quite nicely for our furry friends.

So, with buyers likely to stand aside on Thursday (why put more capital to work directly in front of such a big number?) I told colleagues that I wouldn’t be surprised to see the bears reenter the game. And then when the December same-store sales results for the nation’s retailers came in below expectations I might have expected to see the bears get something more than a 25 point decline. Especially given the weakness in the commodities in response to the rise in the dollar which was driven, at least in part, by talk of risk aversion in Europe.

But instead of the selloff that everyone is expecting, the bulls once again managed to hang around. What this tells me is that while the Jobs data may indeed influence the trading in the short-term, the bulls should be given the benefit of the doubt.

The clock tells me that it is time for the jobs numbers. But first, let’s quickly look at the jobs data we’ve seen this week. First, the ADP report showed big gains in the private sector for December. However, there were some quirks in the data and this report hasn’t exactly been a good precursur for the Nonfarm Payrolls number. Next, Initial Jobless claims moved higher this week. Then the Monster Employment Index fell 3% in December to its lowest leve since March. This represented the third straight decline and indicates online job demand is moderating. Finally, the Rasumussen Employment Index fell 10.0% in December, which was the first decline in 5 months and the biggest drop since July 2009. In short, the employment indicators appear to have pulled back a bit in December.

The Nonfarm Payrolls report is now out, so let’s get to the numbers… The Labor Department reported that Nonfarm Payrolls, rose in the month of December by 103,000. This was below the consensus estimates for an increase of 172,000 and well below the “whisper numbers” for something on the order of +190K.

The private sector (aka the household survey) showed gains of 113,000 jobs, which was also well below the estimates for 187,000K.

However, the nation’s Unemployment Rate dove to 9.4%. While there will undoubtedly be questions raised about the math here, the number was well below the expectations for a reading of 9.7% and November’s level of 9.8%.

October & November payrolls were revised higher by +70K while the Private Payroll numbers were revised higher by +62K.

Average hourly earnings were rose by +0.1 on a month-over-month basis while weekly hours held steady at 34.3.

The bottom line is this report has something for both teams to focus on. However, the report doesn’t change much from a big-picture perspective. As such, it will be interesting to see if the bears can finally get their act together and put together a meaningful decline based on future employment concerns. Or, will the bulls continue to cling to the “blue skies ahead” theory and just keep on keepin’ on? Stay tuned, today’s action ought to be telling…

Thought for the day: best of luck on this Friday and be sure to enjoy the weekend!

Pre-Game Indicators

Here are the Pre-Market indicators we review each morning before the opening bell…

• Major Foreign Markets:
  • Australia: -0.40%
  • Shanghai: +0.52%
  • Hong Kong: -0.42%
  • Japan: +0.11%
  • France: -0.73%
  • Germany: +0.27%
  • London: -0.28%

   

• Crude Oil Futures: + $0.43 to $88.81
• Gold: – $13.40 to $1358.30
• Dollar: lower against the Yen, higher vs. Euro and Pound
• 10-Year Bond Yield: Currently trading lower at 3.380%

   

• Stocks Futures Ahead of Open in U.S. (relative to fair value): 
  • S&P 500: -2.15
  • Dow Jones Industrial Average: -15
  • NASDAQ Composite: -3

Wall Street Research Summary

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