Daily State of the Markets 8/9: Not That Bad
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Good morning. Despite screens adorned with a sea of red numbers at the closing bell, the bulls were able to claim a moral victory on Friday. In short, with so many reasons for stocks to go down, the fact that the Dow finished -21 has to be considered a positive.
The moment after the jobs report was released; it is safe to say that most investors holding stocks were no longer happy campers. The report appeared to be a rather big miss and last month's data was revised significantly lower. Thus, we can confidently place the Jobs report on the negative side of the ledger. Couple the crummy jobs report with a fairly extreme overbought condition, a downgrade of economic expectations at Goldman, the struggles with resistance seen during the week, and a lack of potential positive catalysts on the horizon, and well, a big decline wouldn't have been terribly surprising.
While stocks did dive at the open, it wasn't nearly as bad as it could have been. In fact, the early selling only lasted about 3 minutes. After which, a rally ensued that took the indices back to within spitting distance of breakeven. However, at about 10:30 eastern time, stocks began to dive again and the Dow gave up 120 points in about 30 minutes. While there wasn't any big news story to trigger the selling, word was that a Fed governor had said some discouraging words about the employment picture and how long it might take for things to get better.
The good news is that traders quickly realized that this wasn't really news. So, after several hours of waffling back and forth, a rally got started that took the vast majority of the sting out of the day. The question, of course, was why stocks would rally back on a summer Friday after a miserable jobs number?
While there is no knowing for sure what got the HFT boys leaning long Friday afternoon, it is worth noting that the jobs report really wasn't that bad. Although the headline that the economy lost 132,000 jobs in July got all the attention, the simple fact is that the census alone terminated 143,000 workers, which was just a hair above the expectations for 60K. In addition, the government cut another 59,000 jobs in response to state and local belt-tightening. Next up, that nasty revision to June's payroll numbers was also largely due to government job cuts.
I know what you're thinking... a job loss is still a job loss, regardless of where it comes from. However, the key to the game right now is job creation. And the bottom line is the private sector is starting to create some jobs. And believe it or not, private sector payroll growth is actually performing in line with the 1991 economic recovery and is slightly - wait for it - BETTER than the 2001 recovery.
So, while Friday's report presented no reason whatsoever to party, anyone digging into the data can see that the report really wasn't too bad. And since stocks had lots of reasons/excuses to pull back, you have to give the bulls some credit for their effort on Friday.
Turning to this morning... We don't have any economic news to review before the bell. However, the combination of strong sentiment numbers in Europe and some talk about the Fed resuming its purchase of Treasuries or announce additional stimulus to the economy is pushing stock futures higher in the early going.
Finally, make every effort to enjoy the day...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
Australia: +0.64%
Shanghai: +0.53%
Hong Kong: +0.57%
Japan: -0.72%
France: +1.58%
Germany: +1.36%
London: +1.42%
Crude Oil Futures: - $0.72 to $81.42
Gold: + $3.40 to $1208.70
Dollar: lower against Yen, higher vs. Euro and Pound
10-Year Bond Yield: Currently trading lower at 2.82%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: +5.81
Dow Jones Industrial Average: +45
NASDAQ Composite: +8
Earnings Before The Bell:
DISH Network DISH $0.57* vs $0.53
King Pharmaceuticals KG $0.17 vs $0.16
Scripps Networks Interactive SNI $0.59 vs $0.58
Tyson Foods TSN $0.65 vs $0.59
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: None
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com 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.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
The moment after the jobs report was released; it is safe to say that most investors holding stocks were no longer happy campers. The report appeared to be a rather big miss and last month's data was revised significantly lower. Thus, we can confidently place the Jobs report on the negative side of the ledger. Couple the crummy jobs report with a fairly extreme overbought condition, a downgrade of economic expectations at Goldman, the struggles with resistance seen during the week, and a lack of potential positive catalysts on the horizon, and well, a big decline wouldn't have been terribly surprising.
While stocks did dive at the open, it wasn't nearly as bad as it could have been. In fact, the early selling only lasted about 3 minutes. After which, a rally ensued that took the indices back to within spitting distance of breakeven. However, at about 10:30 eastern time, stocks began to dive again and the Dow gave up 120 points in about 30 minutes. While there wasn't any big news story to trigger the selling, word was that a Fed governor had said some discouraging words about the employment picture and how long it might take for things to get better.
The good news is that traders quickly realized that this wasn't really news. So, after several hours of waffling back and forth, a rally got started that took the vast majority of the sting out of the day. The question, of course, was why stocks would rally back on a summer Friday after a miserable jobs number?
While there is no knowing for sure what got the HFT boys leaning long Friday afternoon, it is worth noting that the jobs report really wasn't that bad. Although the headline that the economy lost 132,000 jobs in July got all the attention, the simple fact is that the census alone terminated 143,000 workers, which was just a hair above the expectations for 60K. In addition, the government cut another 59,000 jobs in response to state and local belt-tightening. Next up, that nasty revision to June's payroll numbers was also largely due to government job cuts.
I know what you're thinking... a job loss is still a job loss, regardless of where it comes from. However, the key to the game right now is job creation. And the bottom line is the private sector is starting to create some jobs. And believe it or not, private sector payroll growth is actually performing in line with the 1991 economic recovery and is slightly - wait for it - BETTER than the 2001 recovery.
So, while Friday's report presented no reason whatsoever to party, anyone digging into the data can see that the report really wasn't too bad. And since stocks had lots of reasons/excuses to pull back, you have to give the bulls some credit for their effort on Friday.
Turning to this morning... We don't have any economic news to review before the bell. However, the combination of strong sentiment numbers in Europe and some talk about the Fed resuming its purchase of Treasuries or announce additional stimulus to the economy is pushing stock futures higher in the early going.
Finally, make every effort to enjoy the day...
Pre-Game Indicators
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
Australia: +0.64%
Shanghai: +0.53%
Hong Kong: +0.57%
Japan: -0.72%
France: +1.58%
Germany: +1.36%
London: +1.42%
Crude Oil Futures: - $0.72 to $81.42
Gold: + $3.40 to $1208.70
Dollar: lower against Yen, higher vs. Euro and Pound
10-Year Bond Yield: Currently trading lower at 2.82%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
S&P 500: +5.81
Dow Jones Industrial Average: +45
NASDAQ Composite: +8
Earnings Before The Bell:
DISH Network DISH $0.57* vs $0.53
King Pharmaceuticals KG $0.17 vs $0.16
Scripps Networks Interactive SNI $0.59 vs $0.58
Tyson Foods TSN $0.65 vs $0.59
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: None
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com 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.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.
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