Weekly Recap & Outlook – 02.07.14

Tower Private Advisors

Below

  • Correction over?
  • Emerging markets concerns remain
  • Payrolls report what the market wanted? Seems like it

Capital Markets Recap

wro

Most of the losses of the first part of the week were recouped by the end, as can be seen from the 1-week return figures above. The S&P 500 remains below its peak level, but appears to have completed its correction, as the breakout from the channel below indicates. The volatility from the emerging markets is probably the most troubling part of what remains unresolved. Some are talking of contagion, where a banking/financial crisis in one EM country spreads to another, eventually reaching the developing world as was [poorly] described in last week’s WR&O. Folks we listen to seem to think the possibility of that is remote.

spx

This Week

After Monday’s market carnage market participants were on tenterhooks coming into today’s Nonfarm Payrolls report. After the obligatory volatility (see chart below), the market settled on the narrative of not too hot; not too cold. We’re not going into recession; the Fed won’t taper faster. Here’s what the collective conscience was going into the report:

  • January report was terrible (+74,000 jobs)
  • Weather’s been lousy
  • Manufacturing data on Monday was weak
  • Service sector looked okay on Wednesday
  • Weather’s been lousy
  • ADP payrolls report on Wednesday not so hot
  • Initial Jobless Claims fell by 19,000 on Thursday, which was good

Today’s report showed that 113,000 jobs had been added, which was weaker than expected (180,000), but the Unemployment Rate fell from 6.7% to 6.6%, and that was with a slight uptick in the Labor Force (people employed and looking for employment).

payrolls

The drop in the unemployment rate is due a strong uptick in the Household Survey figure, the fourth strongest monthly increase in five years. That sorta confounds the weather excuse. You might recall that the household survey is a survey of households–BRILLIANT! That survey determines the unemployment rate, but the bid headline-maker is the Establishment Survey, which surveys…well…establishments. It’s considered a less fickle report, as it doesn’t rely on the reporting of individuals, but of businesses. It’s also more volatile, as can be seen in the chart below.

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Graig P. Stettner, CFA, CMT
Chief Investment Officer
Tower Private Advisors

 

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7 Responses to “Weekly Recap & Outlook – 02.07.14”

  1. Randy Roberts says:

    Thanks. I needed a smile which your humor accomplished.
    How many people read this? Am I the only one?
    Randy

  2. kevin says:

    No, Randy….I, in Toronto, read, and enjoy, it, too!

    Kevin

  3. Dustin Crider says:

    At least two this week. ;-)

  4. Larry Dent says:

    I read it also. Larry Dent

  5. Gjergji Kerenxhi says:

    Thanks,I read it also.

    Gjergji

  6. Lloyd Ehmcke says:

    I read it too!

  7. Brendan Clemens says:

    I am in Idaho & I read it too!

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