Daily State of the Markets 
Friday Morning – September 4, 2009  

During a week where, as a whole, traders tend to be on vacation, it is tough to gauge what the action in the market really means. For if a tree falls in the woods and the traders are on the beach, will anybody care? So, given that the market has done little for most of this week up until the last few minutes of the each day, about the best thing we can say about the action is TGIF.

Okay, we should probably give the bulls some credit for yesterday’s late-day rebound. After being A.W.O.L. for four straight sessions, our bovine buddies were able to shake off an early morning breakaway attempt by the bears and get themselves back in the race. Convincing it wasn’t, but it did seem to stop the bleeding enough to give the glass-is-half-full crowd some hope.

One can also argue that the traders at their desks this week have been waiting on this morning’s jobs report. It is a safe bet that there weren’t many traders wanting to make any big commitments until they got the latest reading on the temperature and blood pressure of the patient.

Although everybody agrees that employment tends to be a lagging, or at best, a coincidental, indicator, traders are still looking for the Big Kahuna of economic reports to confirm their views. The bulls will be hoping to see some signs – any signs – of improvement in the jobs market. The report doesn’t actually have to show significant gains, it just has to support the idea that things are getting better. If this happens, our heroes in horns can argue that there is a reason to discount better days ahead – which, in English, means stocks can go higher.

On the other side of town, the bears will be hoping for a report that shows the jobs market to be languishing and an economy that is continuing to lose a large number of jobs. If they get it, our furry friends will be able to argue, at a minimum, that the stock market is ahead of itself and the 52% “discounting to the upside” has been overdone.

Why bother with such prognostications, you ask? Our thinking is that if we know what each team is looking for, it should be easier to decipher the market’s response. And although traders may still be at the beach house, there is a VERY good chance they will have their computers up and running for this report. So, without further ado, let’s get to it.

The Labor Department reported that Nonfarm Payrolls declined by -216K in August, which was better than the expectations for job losses totaling -230K and July’s reading of -247K. But…the Unemployment Rate jumped up to 9.7%, which was well above the consensus for a reading of 9.5% and July’s 9.4% rate.

In addition, revisions to June and July’s payroll numbers added a total of 49,000 jobs lost as July’s Nonfarm Payroll losses now stand at -276K and June’s total was revised to -463K from -443K.

Running through the rest of the pre-game indicators, with the exception of Japan, the foreign market are higher across the board. Crude futures are moving up with the latest quote showing oil trading higher by $0.54 to $68.50. On the interest rate front, we’ve got the yield on the 10-yr trading up to 3.40%, while the yield on the 3-month T-Bill is trading at 0.13%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 50 points; the S&P’s are up about 6 points, while the NASDAQ looks to be about 11 points above fair value at the moment.

Upgrades/Downgrades/Brokerage Research:

Danaher (DHR) – Estimates increased at Barclays Abercrombie & Fitch (ANF) – Downgraded at Citi Staples (SPLS) – Estimates reduced at FBR Capital WW Grainger (GWW) – Target increased at FBR Capital Sepracor (SEPR) – Upgraded at Goldman Canon (CAJ) – Upgraded at Macquarie Research Lam Research (LRCX) – Mentioned positively at Oppenheimer Biogen Idec (BIIB) – Mentioned positively at Thomas Weisel

Long positions in stocks mentioned: none

Enjoy your Friday, have a pleasant weekend, and until next time, “may the bulls be with you!”

David D. Moenning
Founder TopStockPortfolios.com

For more “top stock” portfolios and research, visit TopStockPortfolios.com


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