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Dallas, TX
April 2, 2009, 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 Report Preview
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What's Hot Today: |
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U.S. stock futures were pointing to a higher opening on Wall Street. Overnight
markets were higher. Oil was higher.
Today's Economic Calendar:
- 8:30 a.m. Initial Jobless Claims For Mar 28 Week: Expected: +3K. Previous: +8K.
- 10:00 a.m. Feb Factory Orders: Expected: +2%. Previous: -1.9%.
- 10:00 a.m. DJ-BTMU Business Barometer For Mar 21: Previous: -0.9%.
News For Thought
Prosecutors' Reach Grows In Madoff Case. According to The Wall Street Journal: "Massachusetts regulators filed civil fraud claims against Fairfield Greenwich Group, the largest feeder fund to Bernard Madoff's Ponzi scheme, claiming the firm ignored red flags as it collected hundreds of millions of dollars in fees."
Congress Awards Staff Members Taxpayer Funded Bonuses On A Yearly Basis. According to The Wall Street Journal: "While Congress has been flaying companies for giving out bonuses while on the government dole, lawmakers have a longstanding tradition of rewarding their own employees with extra cash -- also courtesy of taxpayers. Capitol Hill bonuses in 2008 were among the highest in years, according to LegiStorm, an organization that tracks payroll data. The average House aide earned 17% more in the fourth quarter of the year, when the bonuses were paid, than in previous quarters, according to the data. That was the highest jump in the eight years LegiStorm has compiled payroll information."
Congress also routinely awards itself pay increases, which no one seems to mind. It seems as if a body with a 10% approval rating should re-examine its own pay for performance practices.
So how much bonus money is spread around Capitol Hill? According to The Journal: "more than 200 House lawmakers, both Republicans and Democrats, awarded bonuses totaling $9.1 million to more than 2,000 staff members, according to a Wall Street Journal analysis of office-disbursement forms. The money comes out of taxpayer-funded office budgets, and is surplus cash that would otherwise be forfeited if not spent."
Finally, the Journal added: "Payments ranged from a few hundred dollars to $14,000. Lawmakers, at their own discretion, gave the money to chiefs of staff, assistants, computer technicians, and more than 100 aides who earned salaries of more than $100,000 a year."
To be sure, it's likely that some of these folks work hard and do things for Americans that none of us could ever suspect. But, we'll bet that the same criteria apply to lots of folks who work for Citigroup, Wells Fargo, and even AIG. "We report, you decide."
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Employment Report Preview
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Bellwether Stocks Suggest Weaker Than Expected Payrolls On Friday Possible
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The employment related stocks are suggesting that although there may still be some tough sledding ahead, the worst may be over. Yet, the final word won't be in until Friday, when the employment report is released.
We'll start with the best looking stock of our trio of bellwethers, Administaff (NYSE: ASF). We use this to measure the prospects for small business, the largest producer of employment opportunities in the U.S. Administaff provides outsourced human resource services and back office administrative support, including benefit administration and payroll services for small companies.
Chart Courtesy of StockCharts.com
You've got to admit that the chart looks fairly good, with the stock having bottomed in November and having climbed nearly 60% since the bottom, compared to a 7% rise for the S & P 500 over the period.
The company has been executing well, with its most recent earnings showing a year over year decline, especially in investment income. Yet, given the tough business climate, they made money, suggesting that there are still customers out there who are using their services. There is no real sign that the market thinks that the company won't do reasonably well in the current quarter.
Chart Courtesy of StockCharts.com
Next, we look at Monster Worldwide (NYSE: MWW). This stock offers a glimpse into how the market is betting on the middle of the employment curve, including technical help and middle management.
This stock did not bottom in November. In fact as Administaff was climbing, Monster was losing ground, falling harder with every employment report released. That's what makes the stock's recent rebound interesting.
In other words, the fact that Monster has rebounded suggests that some on Wall Street are betting that the worst may be over for the employment picture. Of course, that's debatable, especially when the most recent ADP report showed that 742,000 jobs were lost in March.
Other employment figures, such as those released by the Institute for Supply Management (ISM) suggest that maybe the rate of rise in unemployment is slowing, as the employment component of the March ISM report checked in at 28.1, rising two points from February, and declining for the eigth straight month.
One other gauge, the Monster Worldwide Employment Index, released early this morning showed yet another decrease in its reading, falling by 4 points. According to the Monster press release, the reading documents "a continued deceleration in online recruitment activity at the end of the first quarter."
There are some interesting subheadings in the index: as "occupations in healthcare practitioners and technical; and architecture and engineering categories experienced declines in March." More interesting is the fact that health care support "experienced a rise in online recruitment activity for the second consecutive month. From an annual growth perspective, support occupations have seen a milder dip in online demand than practitioners/technical, suggesting that healthcare providers have found ways to supplement their staff with lower-cost support workers."
More alarming was this observation: "online job recruitment activity in finance and insurance; and professional, scientific, and technical services, experienced record lows in March. Construction also dipped in the Index, following a month of slightly elevated activity."
In other words, nurses and highly trained technical personnel are being replaced by lower cost, but also lower skill aides, a growing trend that indicates a move toward less contact between patients and nurses, and patients and physicians.
Chart Courtesy of StockCharts.com
Finally, we check in with Manpower Inc. (NYSE: MAN). This is where the market places its bets on the corner office crowd, the big time executives that pilot America's corporations.
And in case you've missed it, this is a bad time to be a company CEO or senior board member, given the negative developments at General Motors, Chrysler, and AIG, just to mention a few key players of the moment.
Manpower shares are in a trading range, although the most recent bottom of the range came in March, and the stock is up nearly 38%, making it a decent swing trade.
Yet, its chart pattern is not particulary alluring, especially when compared to Administaff, which suggests that investors are more willing to take their chances with the human resources administrator than with a pure play on executive employment.
More important is the fact that the company's March employment survey ran the following headline: "Survey Points to Weakest Employment Outlook Since the 1982 Recession."
Conclusion
So our bellwethers are giving us a mixed picture with Administaff continuing to act better than the other two.
That's clearly a distinction that is related to the fact that Administaff provides services to ongoing concerns, or companies that are still doing business. They may also be benefiting from the fact that small businesses may be finding it cheaper to outsource key functions such as human resources to companies like Administaff.
Manpower and Monster are pure plays on employment, a sector that is clearly still in decline, if you believe the overall chart patterns in these two stocks.
So what's in store? If we believe our stock trio, we'll get another nasty employment number on Friday. More important, aside from a human standpoint, will be how the market answers. This rally is getting long in the tooth by bear market standards.
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Technical Summary: |
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Chart Courtesy of StockCharts.com
Remain Patient
The S & P 500 rallied on 4-1, but remained inside its recent trading range. Still, it was nice to see the market actually show that it can hold above the key support area at 800 on the S & P.
A whole lot depends on the action this Friday on the employment report and what develops out of the increasingly volatile G-20 meeting.
Once again, keep in mind that despite the recent rally, by strict definition, we are still in a bear market, and our primary trend remains down.
780-800 is still important support. We are in cash, but have given our SPY model a long entry point. See below for details.
Keep positions small. Keep an eye on your sell stops. Otherwise, as we have noted multiple times of late, there is still no reason to be aggressive in this market. Lots of cash on hand remains the best strategy. Aggressive traders could short the market, but should be ready to cover quickly.
Chart Courtesy of StockCharts.com
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Market Moves - Stock Of The Day
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Oil Service HOLDRS Trust (NYSE: OIH) Suggests That Oil Rally Will Pause
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The Oil Service HOLDRS Trust's (NYSE: OIH) recent gains have begun to fade.
Chart Courtesy of StockCharts.com
Oil service stocks tend to lead the price of oil higher. But the fact that this sector has failed to do more than move sideways over the last several months, coupled with rising crude supply over the same period suggests that demand for crude, and thus economic activity remains subdued.
The flip side, if you're an oil bull is that OIH has managed to move sideways over the last over the last six and on healf months, having bottomed nearly five months before the price of crude.
That means that it's a good bet that when OIH finally breaks out of its trading range, the price of crude is likely to follow at some point.
A lot can change if the employment report is a big surprise, either to the up or down side on Friday. At that point oil traders would have to reset their meter on the potential effect on the market of a rise or of a further fall in oil demand.
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