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Daily State of the Markets To listen to an Audio Version of the report, click on the Play button below:
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Good morning. As you are no doubt aware by now, stocks enjoyed another strong outing on Friday in response to the July Jobs report that came in much better than expected. No, scratch that; the report was actually a lot less bad than had been expected. After all, in normal times, if the economy lost 247,000 jobs in a single month, we might not be dancing in the streets and the Dow and S&P would probably not be spiking up to new cycle-highs.
But then again, in case it is not abundantly obvious, these are not normal times. After the worst bear market in a generation that wound up threatening the viability of the banking system and knocked the stuffing out of most investors’ portfolios, the fact that the economy ‘only’ lost 247,000 jobs last month is actually a good thing. Thus, it would appear that some economic data being less bad remains something to cheer about – well, at least on the jobs front and at least for a while longer, anyway.
Speaking of good things, there were a few other positive points to be found in the employment report. First, the jobs data for both May and June were revised higher with the end result being a total of 43,000 fewer job cuts. In addition, the average workweek ticked up to 33.1 from 33.0, which was its first increase since last August. And finally, the unemployment rate was the real upside surprise on Friday with the rate falling to 9.4% from 9.5%, which was the first decline since April 2008. Economists had expected the unemployment rate to rise to 9.7%. Thus, this resulted in the biggest “miss” by analysts on this number since January 2003.
In sum, the jobs report confirms that the worst of the economic downturn is behind us, and that the recovery process is underway. And in the category of restating the obvious, it is this point that the stock market continues to cheer.
About the only negative to point out from Friday’s session was the rather uninspiring action over in four-letter-land as the NASDAQ was not able to join its blue-chip brethren in new high territory. It would appear that the fast-money crowd has been busy embracing the turn in the economy by selling technology and then buying financials and the early cyclical stuff. Thus, this subtle shift in short-term leadership might be something to watch going forward.
Looking ahead to this week, the key events would appear to be the Fed meeting on Tuesday, the government’s auction of 3-yr and 10-year notes on Tuesday and Wednesday, as well as reports on Retail Sales on Thursday and the Consumer Price Index on Friday.
Turning to this morning, we don’t have any economic news to review before the bell and the earnings season is finally slowing down a bit.
Running through the rest of the pre-game indicators, the major overseas markets are mixed by region as Asia cheered Wall Street’s move while Europe is down. Crude futures are moving lower with the latest quote showing oil trading down by $0.31 to $70.62. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.83%, while the yield on the 3-month T-Bill is trading at 0.16%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to a modestly lower open. The Dow futures are currently off by about 30 points; the S&P’s are down by about 5 points, while the NASDAQ looks to also be about 8 points below fair value at the moment.
Best of luck today and until next time, “may the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
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