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Dallas, TX
April 3, 2008, 08:00 EST |
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Dr. Joe Duarte's Market I.Q. |
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The Internet's Intelligence Digest
Intelligence, Market Timing, And Trading Strategy For Traders and Investors
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Employment Preview: Down But Not Out?
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What's Hot Today: |
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U.S. stocks index futures were flat in early trading as global markets were
mixed. No surprise that the markets will drift today as tomorrow's employment
data will be awaited and closely watched.
Today's Economic Calendar: 8:30a.m. Initial Jobless Claims For Mar 29 Week. Expected: +2K. Previous: -9K. 10:00a.m. Mar ISM Non-Manufacturing Composite Index. Expected: 49. Previous: 49.3. 10:00a.m. DJ-BTMU Business Barometer For Mar 15. Previous: Unch. 12:00p.m. Feb Chicago Fed Midwest Mfg Index. Previous: -0.1%. Sources: The Wall Street Journal and Marketwatch.com.
News For Thought
Recession is "possible" according to Federal Reserve Chief Ben Bernanke. The Chairman of the FOMC told Congress yesterday that he "not yet ready to say whether or not the U.S. economy will face such a situation," and that he expected a rebound in the economy later in the year.
He told Congress that the Fed thinks that the economy is "slightly growing" at the current time, and that the Fed is "focusing" on policies aimed at restoring growth at the moment.
According to the Journal: 'Mr. Bernanke said in his prepared remarks: “It now appears likely that real gross domestic product [GDP] will not grow much, if at all, over the first half of 2008 and could even contract slightly. We expect economic activity to strengthen in the second half of the year, in part as the result of stimulative monetary and fiscal policies.” But, he added, “the uncertainty attending this forecast is quite high and the risks remain to the downside.”' |
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Upside Surprise Awaiting In Data?
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Small Business Still Flat
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Fed Chief Bernanke has finally acknowledged that the U.S. may be headed for recession, but the market and private employment surveys suggest that the employment situation may be near its bottom.
Three private industry employment surveys, ADP, Monster Worldwide, and the ISM's data suggest that the employment situation isn't booming, but that it's not necessarily getting worse.
ADP's data, according to the Wall Street Journal says "Private nonfarm employment grew by a seasonally-adjusted 8,000 jobs in March, the report said, after declining by a revised 18,000 jobs the previous month." Monster's Employment Index edged up two points but was still 10% below last year's index. And the ISM's employment number rose 3.2 points to 49.2, still below the 50% that signified growth, but getting close, and is contracting at a slower pace.
Wall Street is expecting a loss of 60,000 jobs when the report is issued tomorrow morning at 8:30 Eastern time.
Our three stock market indicators, the shares of Manpower Inc. (NYSE: MAN), Monster Inc. (Nasdaq: MNST) and Administaff (NYSE: ASF) are also singing a less sad tune.
Chart Courtesy of StockCharts.com
Manpower (above) is our bellwether for the top tier of employment, the executive market. When this stock rises it suggests that the market is betting on a robust corporate demand for executives, and that implies economic growth.
This stock bottomed in early 2008 and has rallied, especially lately, suggesting that some are starting to bet on a recovery at the top of the employment heap. The stock has run into resistance at the 60 area, suggesting some uncertainty about the future.
Chart Courtesy of StockCharts.com
Moster (below) remains in a down trend, despite a recent bounce. This doesn't speak well for the middle of the market, as well as those who seek jobs online, including the technical, clerical, and middle level consulting segments.
Chart Courtesy of StockCharts.com
Administaff (above) is a fairly good predictor of the health of small business. This is an important segment of the employment picture, as small business is still the biggest employer in the U.S.
This stock has bottomed, but unlike Manpower, and to some degree Monster, it has yet to show that it can rise. This is fairly worrisome, as it suggests that the smart money doesn't see progress in the fortunes of small business, which means that the largest segment of potential jobs is still not ready to expand.
Conclusion
Employment surveys suggest that job contraction may have stopped, but the market is not convinced yet.
Our three bellwethers are saying that only the top of the employment ladder, the executive segment has shown any sign of life, with the middle, and the highly important small business segment still showing a flat market at best.
Wall Street is betting on a 60,000 job loss. Our data says that we may expect a slightly better number than that, but that the odds of a huge up side surprise are very low.
That means that the employment report, usually an explosive number, may not be a very big surprise.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
Stocks Consolidate Big Gains
The market held up quite well after the big April Fool's day rally. Our growth stock section is doing quite well.
Another round of interest cuts is still possible, making the case for stocks even more attractive. And there is plenty of money on the sidelines waiting to come in.
Our growth stock list is starting to expand. Our SPY model is long.
For now, patience is still important, but it's a good time to start building long positions.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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CME Group (NYSE: CME) Shares Suggest Cooling In Commodities
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The mainstream is now noticing high commodity prices, but shares of CME Group (NYSE: CME), where commodities trade, suggest that prices may have topped.
Chart Courtesy of StockCharts.com
Sure it's a long shot, as it seems that oil prices will never fall, and that every time you go to the supermarket, your bill is higher, but the amount of stuff you take home is smaller. But CME shares, topped out in December, and the overall trend in commodities has seen a fairly good size correction in the last couple of weeks.
So what we may be seeing is that the market has started to price in some kind of commodity price decline as the global economy begins to slow.
It's not necessarily an accross the board slowing, as some things, especially energy prices, may not fall too noticeably in the near future.
But here's the logic. CME is the biggest commodity house in the world. That means that anybody that's going to trade anything from barley to gold is likely to have to pass through CME.
The more the demand for anything that has to do with commodity futures, the more likely CME would get a piece of the price as some kind of fee.
As long as demand rises, so do the chances of CME shares rising remain fairly high, as traders continue to factor in the potential for earnings at CME.
Yet, CME shares started dropping a full two months ahead of oil reaching $110, and the grain markets going crazy. Both have cooled off since.
To us, that looks as if the smart money picked up and left CME, looking for greener pastures. And that suggests that commodity prices, at least for now, might have seen their highs. The caveat is that this may just be a correction in an otherwise huge bull market that could still pick up and go on to higher highs.
The only real question is whether any bounce that develops turns into something more. If CME can get back above 600,convincingly, it would likely be a sign that the bull market in commodities has returned. |
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