Friends
We had a pleasant surprise this morning with the release of the non-farm payroll number. After the last several weeks of less than stellar economic reports, the government jobs number was an increase of 244,000 new jobs. That was quite a bit better than the 150,000 or so experts were expecting. We have always thought that the jobs number was the most important indicator that things would begin to improve in the overall economy, and it is vital to improving consumer confidence. The actual unemployment rate ticked back up to 9%, but that is not a surprise given the fact that we felt that many who had given up looking for a job would come back to the market place when they thought some actual jobs might be available.
Pre-market futures are indicating that this employment number took traders by surprise and stocks look to open higher. The S&P 500 fell below the recent 1340 support level yesterday. I would like to see us close the week above that level. Near term resistance looks to be around 1346 to 1349. We have seen a rotation this week from energy, industrial and material stocks to more of the defensive staples indicating that traders were unwinding some of the more overcrowded trades and looking to hide out in less economic sensitive areas. We’ll see if today’s employment numbers reverse that trend.
Oil was down in the $96 per barrel area early this morning but has moved back towards $99 per barrel as the market opening nears. Both gold and silver seem to be firmer in early morning trading. The volatility in these commodities looks like it will continue as traders get whipsawed in these big swings.
With the mixed signals that are coming from various economic reports, the Federal Reserve’s job sure is not getting any easier. If the economy is slowing, signaled by lower GDP numbers, they will be inclined to keep monetary policy easy and liquidity plentiful. If on the other hand the employment report is signaling some improvement, the Fed may be more inclined to start tightening monetary policy and thus take the liquidity punch bowl away. As always, we will be monitoring the developments as summer approaches and will adjust our portfolios accordingly.
Have a nice weekend everyone. Talk to you next week.
