NFP Day: Excuse to Sell?
Expectations for today’s November non-farm payroll data are for gains of 150,000, with economists forecasting a range of 100-200k, with Unemployment likely steady at 9.6%.
NFIB and ADP data suggest that smaller firms have begin to engage in more hiring. That is a positive factor long time coming. As noted yesterday (Will NFP Lead to More Capex, Hiring?), several months of good data could lead to a virtuous cycle in the economy.
In terms of the markets, the impact could be quite different. U.S. Markets have gained 3% over the past 2 days, making them ripe for profit taking. That’s a term regularly abused by the MSM during any selloff, but after 350 Dow points in two days, it might be warranted. (I would expect any sell off to be modest relative to the gains of the past week).
Markets face opposite risks from the Employment data than does the economy. The risk of a strong number is that it removes the incentives for the Fed to keep applying QE2 at full strength. If the economy shows a consistent strength over the next 3 months, the Fed may feel that additional liquidity and quantitative easing is no longer necessary. At a certain point, they may lift their foot off the gas pedal.
Perversely, a mildly disappointing NFP number might be a positive, as it suggests the full QE2 will be applied.
~~~
Employment situation is out at 8:30am
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December 3rd, 2010 at 7:32 am
I will be off the desk at 8:30 — feel free to jump in here
December 3rd, 2010 at 7:45 am
selloff is simply not possible. the Fed will not remove “accommodation.” ever.
every fund manager, quant anf HFT have “learned” to buy the dip. buy the dip!
http://www.youtube.com/watch?v=jllJ-HeErjU&feature=player_embedded (rated *R* for language, keep the vol down)
December 3rd, 2010 at 7:54 am
Mortgage rates after the last NFP spiked, through mid October to early November you could get 3.875 to 4% mortgage rates at par. Yesterday I was quoted 4.675% at par. If revisions come in positive and the NFP beats we could easily be over 5% by next month.
That will hurt the housing market going forward in one respect but the fact the people will be getting back to work will, I think, help it infinitely more.
December 3rd, 2010 at 8:28 am
Pre-market is up nicely. No hint of a sell off just yet, but we have had a strong run. 2-minutes to go.
December 3rd, 2010 at 8:32 am
That video went viral, despite it being tenditious and boring.
From the folks who misunderstood the initial impact of QE2, I guess we should expect continuing misunderstanding of just about everything else.
I read this video as an admission of cluelessness by the same people.
December 3rd, 2010 at 8:32 am
Ouch! Huge miss…
- Nonfarm payroll up 39,000 in Nov., rate at 9.8%
- http://www.marketwatch.com/story/nonfarm-payroll-up-39000-in-nov-rate-at-98-2010-12-03
December 3rd, 2010 at 8:38 am
39k
Futures drop
Be back later
December 3rd, 2010 at 8:46 am
Yesterday’s weakness I pointed out in the Freakout Index (AAPL, NFLX, BIDU, AMZN) which actually peaked about mid-day on Wednesday and was very weak as the “broad market” rallied, was the first sign I’ve seen in a while that things weren’t “fine” with this rally. It makes it look like a bear market squeeze with poor volume underlying large % upmoves.
The second thing that changed yesterday was the FDAX/FESX spread. For the first time in many, many days that spread back-ticked. It’s string of up closes reminds me of trading Eurodollar and Euribor spreads when Fed/ECB is just beginning a new rate cycle…just an unrelenting move. Interesting nonetheless.
As always, trade your signals, size risk, manage on-going risk, and trade well. Forget the news.
Regards,
TrndTrader
December 3rd, 2010 at 8:50 am
The devil is in the details. Most if not all of that 39K increase is accounted for by ‘Temporary Help Services.’ State and Local Government are down 13K. The continuing state and local government fiscal nightmare guarantees bigger drops starting in January. New York City alone is talking about eliminating 6K teaching jobs in January, plus others in the NYC budget. Chris Christie across the river will be throwing folks overboard like a mad man starting then too. After the ADP buildup this report is a terrible letdown. Perhaps it just might provide the necessary incentive to get the unemployment extension passed before the crazies come into Congress.
December 3rd, 2010 at 8:53 am
Although the market is down on the announcement, I think the market will end up liking this news (maybe tomorrow instead of today). Slow growth is just what the market wants – it doesn’t care what the unemployment rate is as long as earnings stay high and interest rates stay low.
December 3rd, 2010 at 9:01 am
Terrible implications for withholding tax, budget deficits and housing. They need a bigger plunger. Little doubt pressure raising the ante on QE is in the works. Bucky says so…. so does Gold. In a devaluation climate, stocks go up too. Tough time envisioning a major sell off with so much Fed and other CB liquidity coming in. It seems pretty clear, heaven and earth will be moved to keep markets buoyant.
December 3rd, 2010 at 9:06 am
“As Zero Hedge expected the ADP was totally and completely off. And so the myth of the recovery can suck it.”
Couldn’t have said it better myself. :( But, my gold and gold fund holdings keep on ROCKIN’….. ;)
December 3rd, 2010 at 9:15 am
Pre-market isn’t that bad. Pretty mild reaction to the numbers so far. There are still quite a few bullish pointers for this month (and for 2011) so I don’t think this miss will derail the bull run much.
- December is usually positive
- End of the month mark-up
- Generally improving economy
- Debt is irrelevant now and will be forgiven in the future
- Continued capitulation by the bears over their chimeric views of America & debt
As long as the market continues to create New Highs, I’ll stay long the market. As soon as those evaporate and the 12-month Simple Moving Average turns down, I’ll short more.
December 3rd, 2010 at 9:17 am
So why the jump in the rate? Is it the growth in the job numbers, coupled with slow hiring that did it? Is it skewed that much?
Seems like a case of 1 step back, compared to 2 steps forward. Seems also like markets do indeed like a slow to stagnant growth in the overall economy, coupled with high profits and lots of government intervention. After all, aren’t stocks all about the value of the company underlying them? Profits feed into owner’s equity or dividends, and those are both good things for a stockholder.
December 3rd, 2010 at 9:23 am
The rate hike is especially interesting considering participation rate stuck at 64.5%
December 3rd, 2010 at 9:24 am
” The risk of a strong number is that it removes the incentives for the Fed to keep applying QE2 at full strength. If the economy shows a consistent strength over the next 3 months, the Fed may feel that additional liquidity and quantitative easing is no longer necessary. At a certain point, they may lift their foot off the gas pedal.
Perversely, a mildly disappointing NFP number might be a positive, as it suggests the full QE2 will be applied.”
The markets may be “resilient” BR, but the economy sure isn’t.
I am sorry, I just don’t get this Heads – the market goes up because of QE2.0, Tails – the market goes up because the economy is recovering logic.
One thing is for sure. Pre-flash crash, the 10 year yield was near 4%. Today at the same level of S&P500 it’s sub 3%.
I trust the bond market wayyyy more than I do the stock market as to the future trajectory of the numbers and hence the markets.
December 3rd, 2010 at 9:31 am
As I said yesterday there are a lot of delusional peeps screaming recovery.
I wonder what they do for a living?
We are not hiring and we don’t need to for the next 3-4 years and we are INSANE CASH RICH for a decade.
December 3rd, 2010 at 9:35 am
p.s.
We have done a few acquisitions over the past 24 months and we have reduced workforce in those by 25% and we are going to let them run until mid spring and then more will be let go as the last of the systems are synced.
December 3rd, 2010 at 9:48 am
[...] NFP Day: Excuse to Sell? [...]
December 3rd, 2010 at 9:53 am
Excuse to sell?????
9:50am – Nasdaq jsut printed green numbers.
The combined wisdom of the market screams at you: buy the F*&^ing Dip!!!!!
http://www.youtube.com/watch?v=jllJ-HeErjU&feature=player_embedded
December 3rd, 2010 at 10:10 am
People don’t need jobs. Just trade the markets. There you go. We can all be rich.
December 3rd, 2010 at 10:14 am
I guess full time employment gets in the way of shopping.
My bad
December 3rd, 2010 at 10:24 am
Hey, here’s a theory: The more unemployment goes up, the cheaper labor will be, and the happier and higher the market will be. Until people revolt, or all wind up on food stamps. Shades of the Great Depression. People with jobs and money liked things just fine.
The MSM will try smooth things out. Let Fox explain to the peeps why this is a great thing.
Market up. Commodities skyrocketing. What could be better. Consumption is flat and will stay there. Corps have adjusted and expect more of the same. The Fed will save them from their inventory issues. Just like before.
December 3rd, 2010 at 10:54 am
“I trust the bond market wayyyy more than I do the stock market as to the future trajectory of the numbers and hence the markets.”
Yes this is the conventional wisdom but it is, like much conventional wisdom these days, wrong.
The bond market is in the business of arbitraging risk free government securities that should not exist.
Equities are a much better real world signal.
Government bonds will continue to bubble away until they are all gone to die in the government bond graveyard round the back of the FED.