Is Another Soft Patch at Hand?
One of the biggest difficulties in providing what I hope will be meaningful market commentary on a day like today is the fact that the session is likely to be all about the jobs report (or the ISM Non-Manufacturing data that comes out a little later this morning – for unlike the payroll numbers, the ISM report actually has a pretty decent correlation to the state of the economy). And since I do my darndest to try and avoid any and all predictions, especially when it comes to guesstimating economic data, it makes providing value in today’s column a little challenging.
So, before we get to the Big Kahuna of economic data – aka the May Nonfarm Payroll report – I wanted to offer up a comment or three on the action leading up to the seemingly all-important (and occasionally utterly confusing) numbers. Cutting to the chase, I’ve been intrigued by how easily distracted the trading has been over the past three months. One minute the game is all about Europe, then its about earnings, then “the trade” takes over, then it’s back to Greece, and now, it would appear that traders are focusing on the economy. All the while, the indices have gone next-to nowhere.
As you might suspect, the bulls are quick to suggest that it is quite positive that the indices haven’t broken down or succumbed to the negativity. As the saying goes, a market that can’t go down on bad news is probably headed higher. And since the S&P is off just 3.7% from its recent high set on April 29th, you’ve got to admit that things certainly could have been a whole lot worse over the past month or so.
But if I’m not mistaken, I may have overheard the players in the opposing dugout using my line yesterday afternoon in their attempt to explain why stocks have yet to fulfill their downside potential. Our furry friends feel that the Street’s obsession with the “correlation trade” has caused traders to become completely distracted from what has been happening in the economy. In short, since traders have been busy with their computer programs, they haven’t done a very good job of discounting a big batch of less-than inspiring data.
So, is it time for the bears to refocus their attention on the fact that another “soft patch” is at hand? Or will the bulls be able to convince investors that Greece will be handled, the Euro will be fine, housing doesn’t matter, and the Fed is sure to do whatever it takes to keep the U.S. to avoid falling into a deflationary spiral?
Or… will traders be completely and utterly distracted by something else besides the data on this fine Friday morning?
Turning to this morning… The May Services PMI numbers from Europe were down from April and stocks have moved modestly lower ahead of the jobs numbers. But it’s time now for the report, so let’s get to it…
On the Economic front… The Labor Department reported that Nonfarm Payrolls, rose in the month of May by just 54,000. This was far below the consensus estimates for an increase of 244,000 as well as the adjusted estimates that had been coming down all week.
The private sector (aka the household survey) showed gains of 83K jobs, which was also below the estimates.
The nation’s Unemployment Rate was rose to 9.1%, which was above the expectations for a reading of 9.0%
Finally, we’ll get the ISM Non-Manufacturing Report at 10:00 am eastern.
David Moenning
Editor: The Daily Decision
