Morning Comment - September 3, 2010
The bulls extended their modest winning streak yesterday, surprisingly so, as they pushed stocks moderately higher a day before the release of the government's key report on employment and unemployment. Often on the day before such a key release, the market just bides its time. The gains, albeit materially less than on Wednesday, when the bull pushed the Dow Jones Industrial Average up 255 points, to better than 10,270, were material nonetheless. In all, the Dow added 51 points, to climb above 10,300, while the NASDAQ jumped by 23 points, a bigger percentage increase.
True, there was some good news issued yesterday, but the upbeat data were just marginally better, and none of the issuances was all that material. Specifically, we saw a slight dip in weekly jobless claims, a nominal uptick in factory orders, and a modest increase in signed housing contracts. None of these reports indicates a major change in economic direction, however.
The market's key preoccupation, meantime, remains the overall employment situation. There, the news has been bleak for some time, with payrolls falling and the jobless rate rising. Similar trends had been expected for August ahead of this morning's release.
And that is just what we received. However, the news was somewhat better than expected. Specifically, payrolls fell by 54,000 last month, a depressing number, to be sure, but one that was less than half as high as the payroll drop of 110,000 expected. Also, July's employment number was revised from a loss of 131,000 jobs to a decline of 54,000. And June's number was pared from a loss of 221,000 to one of 175,000.
Meanwhile, the unemployment rate rose by one-tenth of a percentage point, to the expected 9.6%, a troubling number, and one that should continue to keep the home buyers and retails shoppers away in droves.
Nevertheless, as the news was still better than expected, the futures spiked upward and did so in a big way, with the S&P 500 futures jumping to a gain of more than 10 points and the NASDAQ futures soaring by 24 points.
Thus, a big opening is expected in a few minutes from now. Can the market keep it up? That is always a big question. Importantly, history is not on the side of the bulls, as September is a notoriously bad month for stocks and we are heading into a three-day weekend. Also, in less than an hour from now, we will get a key report on nonmanufacturing activity. The news there is not expected to be noticeably uplifting.