The day is still young, but as of this moment, a rising tide is washing away the “line in the sand.” The S&P 500 dropping below 1600 will take another day or two, at least.
So, here we are. The labor report is in and the verdict is …
- Investors seemed to take the data as a sign the economy was weathering an increase in government austerity this year. U.S. stocks added to gains, while government debt prices were unchanged. The dollar strengthened against the euro and the yen.
Well, the market is up, as I said a moment ago, but the question remains, why is it up? The labor report, so widely anticipated and with so much riding on it, left the market with what conclusion? Is the market happy the US economy is surviving the onslaught of government spending cuts? What does it mean to the market that the US labor report came in above expectations?
- Employers stepped up hiring in May in a show of economic resilience that suggests the Federal Reserve could begin to scale back the amount of cash it is pumping into the banking system later this year.
Wait! The above is supposed to be the bad news, isn’t it? Wasn’t a good labor report supposed to signal the correction is coming, the correction is coming? Then why is the market deep into the green this morning? Shouldn’t we be seeing the S&P 500 going boldly where it has been before – below 1660?
No, me thinks all this blather from the breathless media is much ado about, well, not much, as I have written all week. The supposed bad news gets worse, though.
- The share of the population in the labor force – which includes people who are either employed or looking for work – rose to 63.4 percent. That was driven by 420,000 workers entering the work force.
Did you get that? Workers are entering the work force, not exiting it as they have been. The economy is getting better and the market is not freaking out, which is opposite from what the financial media has been telling us. My point, if you have not gotten it yet over these long years of writing about the market, is that the great thinkers on Wall St. are few and rarely heard. The headline “news” is most always that which generates fear and doubt. It has to be, otherwise it is boring, and CNBC, the Wall St. Journal, and the rest of the big-draw crowd would lose their audiences. The headline news from the financial bastions, more often than not, has little to do with reality.
There is some true bad news in the labor report today.
- Manufacturing employment declined by 8,000 jobs last month.
The drop in manufacturing jobs is truly not good, but it also is not the end of the US economic recovery. It speaks to a drop in exports, which speaks to our two largest trading partners not buying as much from us. Europe, of course, is still looking for the way out of its economic troubles and China is in the midst of a political and economic transformation, which is causing it to slow its rate of growth.
We will see how the day ends. Will the market be up or down? Will it regain much of what it has lost this week and last because of the speculation the market actually is afraid of the Fed reducing its QE experiment?
I don’t know, but don’t be surprised if the buyers I told you about, you know, the ones waiting to see where the market landed after the nonsense abated, decide the bottom is in and it is time to put the money back to work.
Trade in the day; Invest in your life …
