David Moenning Daily State of the Markets: 02/03
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It Doesn�t Matter Until It Does�
Stocks got pasted yesterday as concerns over a number of issues sent the bulls running for cover. In looking for an explanation for the decline, one needs to look no further than one of my all-time favorite Wall Streetisms. As the saying goes, an issue �doesn�t matter until it does, and then it matters a lot.� And in short, this seems to be a good summary for Thursday�s action.
There wasn�t much in the way of new news that triggered the triple-digit drop. Instead, it appeared to be the cumulative weight of many different issues that suddenly became a focal point and pushed the bears into the limelight. So let�s briefly run down the issues at hand.
First there are the intertwined issues of inflation, the economy, and the Fed. The Nonfarm Productivity report showed that productivity declined in the fourth quarter, which was the first drop since Q1 2001 (which, of course, was right before the economy entered recession). And on a year-over-year basis, productivity continued to be below trend.
Next, the report showed that Unit Labor Costs (think paychecks) rose by 3.5% for the quarter and 2.5% for the year. This marked the biggest increase in labor costs since 2000. In short, the report showed that companies are now paying higher wages for less productive workers, which isn�t exactly a great combination on the inflation and economic fronts.
In addition, the report on Initial Claims for Unemployment showed that the labor markets are getting tighter. Now factor in that the Fed has a new inflation sheriff in town, it isn�t much of a stretch to say that yesterday�s reports created concerns over inflation and the economy.
Stocks took a sharp dive at around 11:15 am yesterday as rumors began to circulate that a new and credible Al Qaeda terror threat was about to be announced. While it was flatly denied by Homeland Security, this reminder that terrorists have not gone away was enough to cause some consternation given the current geopolitical issues.
So with concerns over the Middle East, inflation, the economy, and the Fed going too far, traders decided to sell first and ask questions later. The good news is that the down day did little to impact the current trend, which remains positive for the small and mid caps and modestly higher for the bigger name indices.
Turning to this morning, it�s once again all about jobs. This morning�s employment report headline appeared to be disappointing as the number of new jobs created last month was 193,000, which was below the consensus estimate of 244,000. However, upon further review, we see that December�s job growth total was revised higher to 140,000 from 108,000. Thus, the apparent shortfall in the January number was mostly recovered by the upward revision. And over the last three months the economy has created an average of 229,000 jobs, which isn�t half bad.
In addition, the report showed that the Unemployment rate fell to 4.7% from 4.9%, which was certainly a surprise. In short, with solid job creation and unemployment in decline, this number confirms the view that the job market is firming.
Running through the rest of the pre-market indicators, Gold is lower by $2.50 this morning at $574.30; Oil is higher by +$0.26 to $64.94; Natural Gas is up +$0.07 to $8.42; the inversion of the yield curve continues with the 2 yr at 4.60% and 10 yr at 4.59%; and finally, stock futures in the U.S. are down slightly before the bell (Dow -9, S&P -0.20, NASDAQ -2.50).
Stocks "In Play" This Morning:
GOOG � WSJ suggests that higher taxes are responsible for only 50% of miss
AMZN � Reports $0.47
APPC � Reports $0.19 vs. $0.28
ERTS � Reports $0.86 vs. $0.90 and guides lower
MYL � Reports $0.25 vs. $0.24 Revenue $311.2M vs. $308.2M
MRK � Upgraded at Leerink
AMAT � Upgraded at Soleil/Fulcrum
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMAT
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
Stocks got pasted yesterday as concerns over a number of issues sent the bulls running for cover. In looking for an explanation for the decline, one needs to look no further than one of my all-time favorite Wall Streetisms. As the saying goes, an issue �doesn�t matter until it does, and then it matters a lot.� And in short, this seems to be a good summary for Thursday�s action.
There wasn�t much in the way of new news that triggered the triple-digit drop. Instead, it appeared to be the cumulative weight of many different issues that suddenly became a focal point and pushed the bears into the limelight. So let�s briefly run down the issues at hand.
First there are the intertwined issues of inflation, the economy, and the Fed. The Nonfarm Productivity report showed that productivity declined in the fourth quarter, which was the first drop since Q1 2001 (which, of course, was right before the economy entered recession). And on a year-over-year basis, productivity continued to be below trend.
Next, the report showed that Unit Labor Costs (think paychecks) rose by 3.5% for the quarter and 2.5% for the year. This marked the biggest increase in labor costs since 2000. In short, the report showed that companies are now paying higher wages for less productive workers, which isn�t exactly a great combination on the inflation and economic fronts.
In addition, the report on Initial Claims for Unemployment showed that the labor markets are getting tighter. Now factor in that the Fed has a new inflation sheriff in town, it isn�t much of a stretch to say that yesterday�s reports created concerns over inflation and the economy.
Stocks took a sharp dive at around 11:15 am yesterday as rumors began to circulate that a new and credible Al Qaeda terror threat was about to be announced. While it was flatly denied by Homeland Security, this reminder that terrorists have not gone away was enough to cause some consternation given the current geopolitical issues.
So with concerns over the Middle East, inflation, the economy, and the Fed going too far, traders decided to sell first and ask questions later. The good news is that the down day did little to impact the current trend, which remains positive for the small and mid caps and modestly higher for the bigger name indices.
Turning to this morning, it�s once again all about jobs. This morning�s employment report headline appeared to be disappointing as the number of new jobs created last month was 193,000, which was below the consensus estimate of 244,000. However, upon further review, we see that December�s job growth total was revised higher to 140,000 from 108,000. Thus, the apparent shortfall in the January number was mostly recovered by the upward revision. And over the last three months the economy has created an average of 229,000 jobs, which isn�t half bad.
In addition, the report showed that the Unemployment rate fell to 4.7% from 4.9%, which was certainly a surprise. In short, with solid job creation and unemployment in decline, this number confirms the view that the job market is firming.
Running through the rest of the pre-market indicators, Gold is lower by $2.50 this morning at $574.30; Oil is higher by +$0.26 to $64.94; Natural Gas is up +$0.07 to $8.42; the inversion of the yield curve continues with the 2 yr at 4.60% and 10 yr at 4.59%; and finally, stock futures in the U.S. are down slightly before the bell (Dow -9, S&P -0.20, NASDAQ -2.50).
Stocks "In Play" This Morning:
GOOG � WSJ suggests that higher taxes are responsible for only 50% of miss
AMZN � Reports $0.47
APPC � Reports $0.19 vs. $0.28
ERTS � Reports $0.86 vs. $0.90 and guides lower
MYL � Reports $0.25 vs. $0.24 Revenue $311.2M vs. $308.2M
MRK � Upgraded at Leerink
AMAT � Upgraded at Soleil/Fulcrum
Disclosure: At the time of publication Mr. Moenning and/or related companies are long the following positions: AMAT
To see David Moenning�s Trading Record or the rank for any Top Guns Stocks, visit: http://www.AnotherWinningTrade.com/SI
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