Daily State of the Markets 
Monday Morning – February 7, 2011

Until Friday, the BLS’ monthly report on Nonfarm Payrolls was considered the Big Kahuna of economic data. This was the report that set the tone for the market and made or broke traders’ short term plans. It was the Jobs report and the accompanying data on the level of Unemployment in the U.S. that told the boys and their computer toys which way to run their programs. In short, if you got the Jobs report right, the rest was easy.

However, that was before the Labor Department’s latest misadventure with math. Now it appears that the once almighty jobs report may be relegated to the back burner as the numbers proffered on Friday made little sense – to either team!

I guess we could blame the lack of new job growth on the weather (why not, everybody else did). Regardless of the fact that the government’s numbers were well below expectations (by a multiple of almost 4) and ran counter to the data seen in most every other economic survey on hiring, it does make sense that with much of the country having been pounded with snow and ice that the government’s abacus might have been impacted by the weather too.

But what really makes the monthly Jobs report now irrelevant is the reported level of Unemployment. While economists had expected an increase in the Unemployment Rate from 9.4% to 9.5% (due mostly to rounding issues – and on that note, we continue to ponder the question of why the government continues to use only one decimal point in their report), the BLS reported a plunge in the rate to 9.0%.

While I have read a fistful of reports on why the math involved is correct and the factors that collided to provide what would appear to be very good news, the result flies in the face of common sense. While finding a consensus on the state of the economy is usually quite difficult, just about everybody on the planet agrees that jobs remain a problem in the U.S. and that the BLS numbers likely underestimate unemployment in this country. And then on Thursday, we had a guy named Bernanke tell us that the jobs market remains a big problem that may take years to fix. And yet the gov’t proceeds to tell us on Friday that the unemployment is suddenly better – a LOT better. Really?

So, instead of spending a lot more time figuring out how the BLS can give us REALLY good AND REALLY bad news all in the same report, we should probably take a cue here from Ms. Market and just ignore the report. After all, this is exactly what the market did on Friday. And since our job is to identify the drivers of the market on a daily basis, we’ll suggest that you focus on the “other” economic data going forward because it appears that the Big Kahuna is now irrelevant.

Turning to this morning… Easing tensions in Egypt, a total of four new M&A deals, and higher markets in Europe have put the futures on an modestly higher path at the moment.

On the Economic front… We don’t have any economic data to reveiw before the bell this morning. However, we will get the numbers on Consumer Credit at 3:00 pm eastern.

Thought for the day: Do something nice for someone today (for no reason at all)…

Pre-Game Indicators

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

  • Major Foreign Markets:
    • Australia: +0.11%
    • Shanghai: NA
    • Hong Kong: -1.49%
    • Japan: +0.46%
    • France: +0.86%
    • Germany: +0.72%
    • London: +0.74%

     

  • Crude Oil Futures: -$0.05 to $88.98
  • Gold: +$3.20 to $1352.20
  • Dollar: lower against the Yen and Pound, higher vs. Euro
  • 10-Year Bond Yield: Currently trading at 3.658%

     

  • Stocks Futures Ahead of Open in U.S. (relative to fair value): 
    • S&P 500: +3.93
    • Dow Jones Industrial Average: +28
    • NASDAQ Composite: +4.70

Wall Street Research Summary

Upgrades:

Thoratec (THOR) – Auriga ADTRAN (ADTN) – BoaA/Merrill Frontier Oil (FTO) – BoaA/Merrill Tesoro (TSO) – BoaA/Merrill Valero (VLO) – BoaA/Merrill Bristol-Myers (BMY) – Cowen Alpha Natural Resources (ANR) – Added to Short Term Buy at Deutsche Bank Aetna (AET) – Goldman Sachs ArcelMittal (MT) – HSBC PetSmart (PETM) – JMP Securities Skyworks (SWKS) – Stifel Nicolaus Kellogg (K) – UBS Polo Ralph Lauren (RL) – Estimates increased at UBS

Downgrades:

Con-way (CNW) – BB&T Capital Markets, Piper Jaffray Corning (GLW) – Citi Merck (MRK) – Cowen Weyerhaeuser (WY) – Credit Suisse, UBS UnitedHealth (UNH) – Goldman Sachs CB Richard Ellis (CBG) – Goldman Sachs Jones Lang LaSalle (JLL) – Goldman Sachs Staples (SPLS) – Goldman Sachs Sensient (SXT) – Oppenheimer Comverge (COMV) – Stifel Nicolaus Brooks Automation (BRKS) – Stifel Nicolaus PPL Corp (PPL) – UBS Devon Energy (DVN) – UBS

Long positions in stocks mentioned: None

 

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.

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