The week ended well enough even though it was loaded with enough data to keep physicists busy trying to piece all the news together. On the one hand there was good economic data most of the week which fueled speculation the economy was turning the corner. The got bulls fired up even as good news gave rise to “taper on” thoughts which would be a negative.
Friday’s Employment Report was miserable enough for bulls to believe “taper off” was back in play. (For the MSM, it was enough to convey happy talk to Main Street since the unemployment rate dropped which is all these folks have time to focus on.)
But further analysis from Zero Hedge’s Tyler Durden to conclude the following summation:
“July Nonfarm payrolls +162K missing expectations of 185K; June was revised lower to 188K and the unemployment rate dips from 7.5% to 7.4%. The rate dropped because the civilian labor force declined from 155,835 to 155,798 or 37K, driven by an increase of people not in labor force to 89,957 - just shy of the all time high. This also means that the labor force participation rate once again ticked down to 63.4% from 63.5%. What is worse however is that the change in average hourly earnings dropped -0.1% on expectations of a 0.2% increase and down from the 0.4% increase last month. Those part-time jobs are finally starting to bite.”
Of course the Employment Report made a hash of positive speculations following the ADP and Jobless Claims reports would yield a spectacular report Friday. Not a chance.
But wait, there’s more!
Personal Income & Outlays were disappointing. Personal Income (.3% vs .4% exp & prior revised lower from .5% to .4%): Outlays (spending to most) rose (.5% vs .4% exp & prior revised lower from .3% to .2%) The easy conclusion is spending more and earning less. Is that those part time jobs again?
Factory Orders fell (1.5% vs 2.3% exp & prior revised to 2.1% vs 3%). Also within the data average hourly earnings fell (-.1% vs .2% exp & prior .4%) and this isn’t a good sign.
Russia’s Putin has given Obama a poke in the eye with the Snowden affair and some stories even have more Russian guided missile warships headed to Cuba. (Oh dear, back to the future?) If that’s not enough, it’s helter-skelter in the Middle East as the U.S. is closing some ME embassies for fear of attacks. One targeted embassy is the palatial embassy built in Baghdad—another great investment. (Gosh, we’re doing a great job over there! No wonder Americans have turned against anything and everything in that region and are becoming more isolationist.)
Well, let’s not sweat the details shall we? The bottom line is bulls love the idea of crummy employment data which would obviously be paired with more QE. Eventually this will end badly but traders and algos alike love the time they’ve been given to trade the snot out of markets. Hey, we’re with them since that’s our job.
Stock markets took a rest Friday. Leading sectors tech (QQQ & XLK), homebuilders (ITB), Japan (EWJ), Colombia (GXG), Europe (EZU), EAFE (VEA) and bonds (TLT). Lagging issues included Energy (XLE) gold miners (GDX), (Semiconductors (SMH), Oil (USO), India (EPI), Solar (TAN) and the dollar (UUP). REIT ETFs (IYR) have seen hard times over the last couple of months as interest rate increases and heavy refinancing needs pressure the sector. We discussed this briefly in today's ETF in Focus video featuring IYR.
Volume still quite light and running about 40% below the three month average which was also light. Breadth per the WSJ was mixed to positive. Money flow for the week seems quite negative.
We made it through the week’s gauntlet of data and earnings with markets breaking out and making new all time highs in many sectors. We’re long but as usual keeping one eye on the exit. August should continue to see light volume as many people enjoy the last part of summer.
There will be a couple of more weeks of earnings data but economic data next week is negligible.
Enjoy your weekend.
Let’s see what happens.
Disclaimer: The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.
Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotation's aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com