AI
Friday, February 02, 2007 10:43:04 PM
Market Update 070202
http://biz.yahoo.com/mu/update.html
4:20 pm : The major averages finished in split fashion Friday, indicative of the divide among investors as to what today's encouraging employment data mean for Fed policy.
Before the bell, the Labor Dept. showed that only 111,000 nonfarm payrolls were added in January. Since that was weaker than the consensus estimate and below the average gain of 153,000 per month for all of 2006, some investors viewed the news as bearish.
Throw in the Dow closing at record levels for a fifth time this year a day earlier and the S&P 500 on pace for its best weekly performance since August and a sense that blue chips may be overbought at current levels offered sellers an excuse to take some money off the table. The Dow snapped a three-day winning streak.
Be that as it may, looking beyond the headline read of lower payrolls did in fact show that the Fed is doing a surprisingly good job of managing a soft landing for the economy. Upon further analysis, an upward revision to previous data left the December figure at a strong 206,000, which equates to an additional 39,000 jobs. Add that to a January figure that is also likely to be revised higher, and the net two-month gain was exactly what the economists' January forecast of 150,000 assumed.
With investors now more preoccupied with inflation than the pace of economic growth, the report's hourly earnings component garnered even closer attention. To the market's surprise, average hourly earnings rose just 0.2%, following a downward revision to the previous month, and lowered the year/year gain to 4.0%. That was good news since it does not reflect the inflationary wage pressures that the Fed remains concerned about, as evidenced by their continued focus on "the high level of resource utilization."
Nonetheless, more evidence that the economy remains on a good growth path also did little to renew optimism about the Fed cutting rates anytime soon. Thus, with policy makers still exhibiting a tightening bias -- a fundamental shift from the point of view that helped stocks rally in the second half of 2006, it was not surprising to see a lack of conviction on the part of both buyers and sellers.
The market's resilience of late to rising energy prices was noteworthy. A late-day rally closed the March crude contract up 3.1% and at its highest levels for the year ($59.10/bbl); but since policy makers now believe that the "impetus from energy prices" has been reduced so much that there was no mention of it whatsoever in the Fed's recent FOMC statement, oil's inflationary potential was somewhat muted. The Energy sector's failure to take full advantage of oil's extended upturn, however, posed a problem from a leadership standpoint as Energy's modest 0.4% gain was only outdone by Telecom and Utilities -- two of the least influential sectors on the S&P 500.
As evidenced by the Nasdaq turning in the day's best performance among the majors, Technology attracted modest buying interest, but not even enough to offset Thursday's pullback. In fact, had it not been for a 2.0% surge in shares of Cisco Systems (CSCO 27.14 +0.55) following upbeat analyst commentary, the tech-heavy Composite might have also succumbed to some modest consolidation heading into the weekend. BTK +0.1% DJ30 -20.19 DJTA +0.2% DJUA +0.8% DOT +0.9% NASDAQ +7.50 NQ100 +0.4% R2K +0.2% SOX +0.9% SP400 +0.3% SP500 +2.45 XOI -0.3% NASDAQ Dec/Adv/Vol 1356/1648/1.92 bln NYSE Dec/Adv/Vol 1386/1869/1.41 bln
10:00 am : Early gains are short lived as a renewed wave of selling pressure steps in to nudge all three major averages into the red. The blue-chip index initially set a new intraday high right out of the gate, but with today's jobs report also reminding investors that a rate cut still isn't likely to happen anytime soon, it appears investors have found an excuse to take some money off the table following three straight days of gains. Fortunately for the bulls, there is little conviction on the part of sellers as eight out of 10 sectors may be trading lower, but the biggest disappointments are also being seen among the least influential areas on the S&P 500. DJ30 -25.88 NASDAQ -1.32 SP500 -1.43 NASDAQ Dec/Adv/Vol 1141/1297/190 mln NYSE Dec/Adv/Vol 1120/1311/70 mln
09:40 am : Stocks open on an upbeat note as investors digest more proof that the Fed is doing a remarkably good job of managing a soft landing for the economy. Given its influence on the market's outlook for the economy and monetary policy, an encouraging January jobs report is acting as the biggest source of early support. January nonfarm payrolls rose a lower than expected 111,000; but with December and November payrolls upwardly revised to account for an additional 81,000 jobs, the January figure is also likely to be revised higher.
More notably, though, was the fact that workers' average hourly earnings rose only 0.2%, following a downward revision to the previous month. That does not reflect the inflationary wage pressures that the Fed remains concerned about as evidenced by their continued focus on "the high level of resource utilization." An unexpected rise in the unemployment rate for the first time in three months is also noteworthy. DJ30 +6.49 NASDAQ +7.15 SP500 +1.35 NASDAQ Vol 88 mln NYSE Vol 48 mln
09:15 am : S&P futures vs fair value: +2.4. Nasdaq futures vs fair value: +6.5.
09:00 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +7.0. Futures continues to hold a positive tone as investors rally around more evidence that the U.S. economy remains on a good growth path. As evidenced by subsequent buying interest in bonds, January hourly earnings rising just 0.2%, coupled with a downward revision to the December increase of 0.5% to 0.4%, easing concerns about inflationary pressures from wage costs is the underlying driver that looks to extend the market's winning streak to four. It is also worth noting that Nasdaq 100 futures hold an even stronger upward bias following an analyst upgrade on the index's most influential component -- Microsoft (MSFT).
http://biz.yahoo.com/mu/update.html
4:20 pm : The major averages finished in split fashion Friday, indicative of the divide among investors as to what today's encouraging employment data mean for Fed policy.
Before the bell, the Labor Dept. showed that only 111,000 nonfarm payrolls were added in January. Since that was weaker than the consensus estimate and below the average gain of 153,000 per month for all of 2006, some investors viewed the news as bearish.
Throw in the Dow closing at record levels for a fifth time this year a day earlier and the S&P 500 on pace for its best weekly performance since August and a sense that blue chips may be overbought at current levels offered sellers an excuse to take some money off the table. The Dow snapped a three-day winning streak.
Be that as it may, looking beyond the headline read of lower payrolls did in fact show that the Fed is doing a surprisingly good job of managing a soft landing for the economy. Upon further analysis, an upward revision to previous data left the December figure at a strong 206,000, which equates to an additional 39,000 jobs. Add that to a January figure that is also likely to be revised higher, and the net two-month gain was exactly what the economists' January forecast of 150,000 assumed.
With investors now more preoccupied with inflation than the pace of economic growth, the report's hourly earnings component garnered even closer attention. To the market's surprise, average hourly earnings rose just 0.2%, following a downward revision to the previous month, and lowered the year/year gain to 4.0%. That was good news since it does not reflect the inflationary wage pressures that the Fed remains concerned about, as evidenced by their continued focus on "the high level of resource utilization."
Nonetheless, more evidence that the economy remains on a good growth path also did little to renew optimism about the Fed cutting rates anytime soon. Thus, with policy makers still exhibiting a tightening bias -- a fundamental shift from the point of view that helped stocks rally in the second half of 2006, it was not surprising to see a lack of conviction on the part of both buyers and sellers.
The market's resilience of late to rising energy prices was noteworthy. A late-day rally closed the March crude contract up 3.1% and at its highest levels for the year ($59.10/bbl); but since policy makers now believe that the "impetus from energy prices" has been reduced so much that there was no mention of it whatsoever in the Fed's recent FOMC statement, oil's inflationary potential was somewhat muted. The Energy sector's failure to take full advantage of oil's extended upturn, however, posed a problem from a leadership standpoint as Energy's modest 0.4% gain was only outdone by Telecom and Utilities -- two of the least influential sectors on the S&P 500.
As evidenced by the Nasdaq turning in the day's best performance among the majors, Technology attracted modest buying interest, but not even enough to offset Thursday's pullback. In fact, had it not been for a 2.0% surge in shares of Cisco Systems (CSCO 27.14 +0.55) following upbeat analyst commentary, the tech-heavy Composite might have also succumbed to some modest consolidation heading into the weekend. BTK +0.1% DJ30 -20.19 DJTA +0.2% DJUA +0.8% DOT +0.9% NASDAQ +7.50 NQ100 +0.4% R2K +0.2% SOX +0.9% SP400 +0.3% SP500 +2.45 XOI -0.3% NASDAQ Dec/Adv/Vol 1356/1648/1.92 bln NYSE Dec/Adv/Vol 1386/1869/1.41 bln
10:00 am : Early gains are short lived as a renewed wave of selling pressure steps in to nudge all three major averages into the red. The blue-chip index initially set a new intraday high right out of the gate, but with today's jobs report also reminding investors that a rate cut still isn't likely to happen anytime soon, it appears investors have found an excuse to take some money off the table following three straight days of gains. Fortunately for the bulls, there is little conviction on the part of sellers as eight out of 10 sectors may be trading lower, but the biggest disappointments are also being seen among the least influential areas on the S&P 500. DJ30 -25.88 NASDAQ -1.32 SP500 -1.43 NASDAQ Dec/Adv/Vol 1141/1297/190 mln NYSE Dec/Adv/Vol 1120/1311/70 mln
09:40 am : Stocks open on an upbeat note as investors digest more proof that the Fed is doing a remarkably good job of managing a soft landing for the economy. Given its influence on the market's outlook for the economy and monetary policy, an encouraging January jobs report is acting as the biggest source of early support. January nonfarm payrolls rose a lower than expected 111,000; but with December and November payrolls upwardly revised to account for an additional 81,000 jobs, the January figure is also likely to be revised higher.
More notably, though, was the fact that workers' average hourly earnings rose only 0.2%, following a downward revision to the previous month. That does not reflect the inflationary wage pressures that the Fed remains concerned about as evidenced by their continued focus on "the high level of resource utilization." An unexpected rise in the unemployment rate for the first time in three months is also noteworthy. DJ30 +6.49 NASDAQ +7.15 SP500 +1.35 NASDAQ Vol 88 mln NYSE Vol 48 mln
09:15 am : S&P futures vs fair value: +2.4. Nasdaq futures vs fair value: +6.5.
09:00 am : S&P futures vs fair value: +2.8. Nasdaq futures vs fair value: +7.0. Futures continues to hold a positive tone as investors rally around more evidence that the U.S. economy remains on a good growth path. As evidenced by subsequent buying interest in bonds, January hourly earnings rising just 0.2%, coupled with a downward revision to the December increase of 0.5% to 0.4%, easing concerns about inflationary pressures from wage costs is the underlying driver that looks to extend the market's winning streak to four. It is also worth noting that Nasdaq 100 futures hold an even stronger upward bias following an analyst upgrade on the index's most influential component -- Microsoft (MSFT).
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