Investor’s first read – Brooksie’s edge before the open
Monday, April 9, 2012 9:08 a.m. ET
DJIA: 13,060.14 S&P 500: 1398.08
Friday’s Employment Situation Report came in with 120,000 new jobs created in February, not 205,000 as forecasted in a Bloomberg survey. This comes after gains of 227,000. 284,000, and 223,000 in the three preceding months. Is that why the Fed is reluctant to declare a victory over post recession trauma ? Or is it, as I suspect, earnings just aren’t as exciting this time around as in recent quarters ?
This is why I have given so much ink to the economic reports for the week and warned that there is “No room for disappointment.”
I sensed something was wrong Monday and Tuesday, but suspected it was concern for the pending earnings reports. That may be part of it, but clearly, someone was aware of the disappointing Employment Situation Report.
TODAY: Thursday I projected that an unenthused rally would yield to a brief drop to DJIA 12,914, followed by a rally. If it got there, I said it would be a nimble trader’s buy. The sequence was played out, but the DJIA didn’t get down to 12,914.
That was before the Employment Situation report Friday morning, a market holiday. The DJIA will get there today, but won’t be a nimble trader’s buy, or buy for any other trader.
The market needs time to adjust to the Employment Situation numbers as well as quarterly earnings reports which will begin to flow with Alcoa’s (AA) report tomorrow.
While the 2.6%, four-day drop since Apr. 2 discounts some of the disappointing employment report, I think we need more downside before a “comfort” level is reached, let’s say DJIA 12,795 (S&P 500: 1369).
What could reverse this slide ?
Unexpectedly good earnings.
No longer the case. We can only wait to get a handle on that.
Worse than expected earnings ?
BIG CRUNCH !
Europe has been off the front pages, but problems with Spain may put it back in the forefront, which could extend the correction underway now.
Is technology finally taking its toll on the unskilled ? The counter argument has always been that for every job technology replaces it creates one with the formation of a new company or the employees hired to develop and implement new products/services.
Maybe that’s no longer the case. Much of the technology developed replaces unskilled workers, and as we are seeing one of the complaints employers have today is they can’t fill openings because applicants don’t have the skills to fill them. They aren’t hiring unskilled workers, they don’t have to, technology has replaced them.
This will get worse until people get specific training or are trained in-house. One answer, of course, is to create jobs for unskilled workers through a massive infrastructure project.
The American Society of Civil Engineers gives our nation a “D” for its 15 infrastructure categories, estimating it would take $2.2 trillion and five years to upgrade to an acceptable l;evel.
Workers would be trained in-house, or otherwise, or until our legislators give a higher priority to fighting wars here not abroad and spend money on infrastructure projects that employ unskilled or readily trained workers to do the work.
I felt and wrote, that infrastructure was a no-brainer coming out of the great recession – didn’t happen. Politically it makes sense – every state has infrastructure in need of upgrade/repair. Guess that’s not where the BIG money wants the action.
ECONOMIC INDICATORS:
Friday’s disappointing Employment Situation Report jolted the financial community, triggering renewed concern that the economic recovery was at risk of slowing down.
Its significance has been downplayed by some economists as an emerging seasonal glitch, but without something to counter the concern that the economy has hit yet another soft patch, uncertainty, perhaps fear will emerge to put a lid on the market.
ECONOMIC REPORTS this week:
TUESDAY:
- ICSC Goldman Store Sales (7:45)
- Wholesale Trade (10 a.m.) U.S. Tsy budget showed a February budget deficit of $231.7 billion. As a result of increased corporate income taxes and reduced interest payments, the deficit is running 3.3% below a year ago.
WEDNESDAY:
- Import/Export Prices (8:30) jumped 0.4% in February due to higher oil prices which were up 1.8% in February alone, 18.4% year over year.
- Beige Book (2 p.m.)
THURSDAY:
- Jobless Claims (8:30) Declined 6,000 for the March 31 week to 357,000 bringing the four-week moving average down 4,250 to 361,750.
- International Trade (8:30)The international trade gap expanded in January to 52.6 billion from $50.4 billion in December. The increase in the gap was accounted for by a widened deficit in petroleum goods.
- Producer Price Index (8:30) Surged in February 0.4% powered by a 1.3% spike in energy. Core PPI was off 0.2%.
FRIDAY:
- Consumer Price Index (8;30)Jumped 0.4% after a 0.2% gain in January. Excluding food and energy, it was up 0.1%. Gas prices were up 6.0%, food prices flat.
- Consumer Sentiment (9:55 a.m.) The Reuter’s Univ, of Michigan Consumer Sentiment Index for March rose to 76.2 vs.75.3
George Brooks
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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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