How Does Upbeat Jobs Report Affect Fed Taper?
The Employment Situation report came in at 8:30 and it read well with new non-farm jobs increasing 195,000 in June vs. an upwardly revised 195,000 in May.
The unemployment rate was unchanged at 7.6% from May and jobless claims were down 5,000.
What we are seeing is an acceleration in job growth, which strongly suggests employers are becoming more confident in the economy’s future.
Worth noting, the type of job adding to this report is concentrated on lower income jobs, not the middle income type job where an increase would signal cash-rich corporations are finally spending on people and consequently plant and equipment.
At some point, both will explode, but I think we need improving economies in Europe and Asia as a catalyst. Just give us an amber light turning green.
CONCLUSION::
This report suggests employment is on the increase which buoys confidence. Add to that, the rapidly increasing “Wealth Effect,” (Rising home and stock prices) and you have an economy rounding first and heading for second.
What about this good news is bad, and bad news is good, because the latter increases the odds that the Fed won’t be tapering out of QE any time soon ?
Too early to tell. The stock-index futures were up big well before the jobs report today. While that may signal relief that the economic recovery is on tract, it may have more to do with shortened trading Wednesday and a closed market yesterday.
I’m uncomfortable with buying the open here which could feature a DJIA up 125 to 150 points, which translates into a gain of 4% over 9 days. What’s more, at DJIA 15,195 (S&P 500: 1,636) the market runs into what technicians call a “downtrend line.”
For the moment, the Street isn’t overly focused on prospective Fed taper. Let’s see how the market behaves, when it is.
AT some point the Street will greet good news as just that and concede Fed taper isn’t the end of a bull market – a speed bump, but not a wall.
Investor’s first read – an edge before the open
DJIA: 14,988.65
S&P 500: 1,615.41
Nasdaq Comp.: 3,443.66
Russell 2000: 991.36
Friday, July 5, 2013 (9:06 a.m.)
Apple (AAPL: $420.80)
Up slightly yesterday on top of nice moves Monday and Tuesday after it filed a trademark application in Japan for iWatch, as well as after a Raymond James upgrade to “strong buy” from “outperform.”
The stock was due for a bounce, having plunged 17% in less than two months.
The stock may also have benefitted from institutional buying during the first days of Q3.
Odds favor AAPL has seen its lows for 2013, but it has had 5 false moves since its September 2012 high of $705. Minor support is now $412. Resistance starts at $432.
FACEBOOK (FB – $24.52) No change
Pattern is positive, but some slippage likely with support now down to $24 after yesterday’s drop. A seller came in around $25 on June 19 and Monday. FB could slip below $24 in a soft market. The rebound that started in early June is getting a bit disorganized, the stock needs a big buyer to blast it beyond $25.40.
NOTE: Generally, I don’t recommend or comment on individual stocks. I started covering FB technically on May 21, 2012 after its IPO, because I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I’ll continue technical coverage for a while to accommodate readers.
I picked up AAPL late last year when it was in a tailspin with an objective of targeting a bottom. Both were widely followed, and I thought my input would help. I would like to add more stocks to my “technical” following, but the deadline nature of this letter , which is market-focused, make it difficult. That is still a possibility.
I do not own either AAPL or FB, nor have I ever owned them.
ECONOMY:
The Street is now faced with a choice – Is it hoping for disappointing reports and an increase in the likelihood that the Fed won’t back away from QE soon ? Or will it hope for upbeat reports, a sign that QE has been helping. It can’t have it both ways – For access to information including charts and graphics go to www.mam.econoday.com .
Note: Time of release not available
FRIDAY:
Jobless Claims (8:30) Proj :345,000
Employment Situation Report (8:30) Proj: 161,000 nonfarm; Private: 175,000
Unemployment rate: 7.5%
Note: The FOMC: Federal Open Market Committee: 12 voting members, 7 from the Fed. Res. Board, 5 from the 12 F.R. Banks.
Tasks: Oversee open market operations (buying and selling U.S. Treasury securities); make key decisions on interest rates and money supply. Establish a target level for federal funds rate (rate commercial banks charge between themselves for overnight loans between institutions that have surplus balances and those that don’t.
George Brooks
“Investor’s first read – an edge before the open”
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The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.
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