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Daily State of the Markets Good morning. Traditionally, the big story on the first Friday of every month is the Big Kahuna of economic data, aka the Nonfarm Payrolls report. And while the jobs report did contain some surprises, this time around it was the PIGI’S, the dollar, and the big dive/rebound in stock prices that stole the show. In case you missed it, the Commerce Dept. reported on Friday that the economy lost another 20K jobs in January, which was well below the consensus estimate for a gain of 15K jobs. And due to the quirky way the government counts who is unemployed and who isn’t, the report showed that the Unemployment Rate actually fell from 10.0% to 9.7%. While most analysts scoffed at this number, the good news was that the forward-looking components of the report such as temporary help, hours worked, and manufacturing job totals pointed to blue skies ahead. The bulls also got some good news on the political front on Friday. Senate Banking Committee Dodd said that the administration’s so-called Volcker Rule is too difficult to build into the Financial Regulatory Reform bill. Dodd then announced that he and Senator Shelby had reached an impasse on the bill and will move forward accordingly. Thus, it would appear that gridlock has indeed returned to Washington. As expected, stocks opened lower and began flirting with some important longer-term technical levels on the charts. But then the bad news began to flow again. First, we got word that one of the little PIGI’S (Portugal) had decided against a government austerity program and instead passed a bill allowing the country’s autonomous regions to rack up as much debt as they see fit. This did not help the sovereign debt situation and created another reason for traders to move away from the Euro and into the U.S. dollar. Things then got downright ugly after lunch on Friday as rumors of a blowup in at least one energy/commodity related hedge fund made the rounds. This created more selling in the already beaten down commodity market and a corresponding spike in the dollar. And then, true to form, stocks dove to new lows as it felt like panic was starting to set in. But with stocks breaking to new lows and the S&P down 8.5% from its high, traders may have decided to cover some shorts at around 2:00 pm. Or maybe those in the bear camp decided that they wanted no part of the strength that has shown up for the last eight Monday’s in a row. Or maybe, just maybe, the forced selling in hedgieland came to a stop. But in any event, stocks spiked higher with about an hour left in the session. The Dow popped up 100 points in 10 minutes. Then after the requisite pause, traders hit the buy button into the close, pushing the Dow up another 50 points over the last 10 minutes of the session. The bulls will argue that the furious rally in the last hour is a sign that the corrective action we’ve seen since January 19th is coming to a close. However, since the move was obviously driven by computer generated buy programs, we’re going to withhold judgment at the present time on the question of whether or not the correction is over. Turning to this morning, we don’t have any economic news to review before the bell and the earnings calendar is relatively light. On the news front, we’ve learned that both Deutsche Bank and UniCredit have suspended all loans to Greek banks. Running through the rest of the pre-game indicators, the overseas markets are mostly lower but only fractionally so. Crude futures are up $0.20 to $71.39. On the interest rate front, we’ve got the yield on the 10-yr trading higher at 3.58%. Next, gold is moving up by $13.00 and the dollar is higher against the Euro and the Pound, but lower against the Yen. Finally, with about an hour before the bell, stock futures in the U.S. are pointing to a slightly lower open. The Dow futures are currently off by about 25 points; the S&P’s are down about 2 points, while the NASDAQ looks to be about a point above fair value at the moment.
* Report includes items that make comparisons to the consensus estimate questionable Wall Street Research Summary Upgrades: |
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Nordstrom (JWN) 0 BMO Capital AutoZone (AZO) – Citi Exxon Mobil (XOM) – Collins Stewart Southern Copper (PCU) – Credit Suisse Weyerhaeuser (WY) – Credit Suisse Genzyme (GENZ) – Removed from Conviction Sell list at Goldman Essex Property (ESS) – Janney Capital CME Group (CME) – Jefferies Walt Disney (DIS) – JPMorgan Torchmark Corp (TMK) – JPMorgan Newell Rubbermaid (NWL) – Morgan Stanley Home Depot (HD) – Morgan Stanley IntercontinentalExchange (ICE) – Susquehanna Priceline.com (PCLN) – Susquehanna
Petrohawk Energy (HK) – Bernstein St. Jude Medical (STJ) – Added to Conviction Sell list at Goldman Dun & Bradstreet (DNB) – JPMorgan
Long positions in stocks mentioned: none
Best wishes for a pleasant day and until next time, “May the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
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