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Friday, December 03, 2004

Jobs Report - Even Worse Than it Looked

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Economic Statistics

The big report for the week - the one everyone was waiting for, and the one that every dill and his dog were "front running" - was the Employment Situation report.

The numbers came out at 12:30 our time; last night's insto report from the ticket-clippers' touts was all breathless, blathering about how the indices would head to the moon if the number exceeded 250k...

Oh dearie dearie me.

New non-farm payrolls were reported at 120k, which fell short of the consensus guess (which according to the newswires was 190k - the tout sheet last night reckoned 200k... I'm never surprised when consensus falls after bad data is released). So that's one bad thing - but in fact it was even more worser than it looked.

The CES net birth death model - which I prefer to call the "fictional job creation" model - added 54,000 phantom jobs, which (as luck would have it) offset the 54,000 downward revision to September and October!!!

So, there's been a 54,000 "reduction of history", offset by 54,000 phantoms. Without those phantoms, the job situation in the US looks dire; and phantoms don't spend anything - not even on hedonically adjusted stuff.

Not only weren't many new folks employed, but their pay didn't rise but a hair. Average hourly earnings rose 0.1%, which fell short of the consensus guess (0.3%). So incomes are rising slower than inflation... that's just dandy unless you need your income to do stuff like, oh, buy food and clothing.

The Average workweek even fell! It was reported at 33.7 hours, which fell short of the consensus guess (33.8 hours).

Let's do some sums (it's fun, honest).

The workweek falls by a tad under 0.3% (0.1 hours), and wages per hour rise by 0.1%. Guess what? The average worker went backwards in nominal terms! Inflation be damned, these poor schlubs aren't even going ahead in raw dollar terms.

(The appropriate sum is 0.997 x 1.001, which you'll find equals 0.997997; i.e., workers went backwards 0.2% for the month in aggregate average wages per week).

The Unemployment Rate was static at 5.4%, which was the one number that was in line with the consensus guess.

Later in the session, the ISM non-manufacturing survey was reported at 61.3, which exceeded the consensus guess (58.5). Lots more burgers being flipped and lots more pizzas being delivered - all at lower average weekly pay! What more could you ask for?

    Forthcoming US Economic Data

    Tomorrow's US Economic Data Calendar

    Federal Reserve Open Market Operations

    The Fed's Open Market Operations desk performed 1 repurchase operation last night:

    • a $3.5billion, weekend repurchase, entirely in T-backed collateral.

    No grease, no moonshot (although there was a nice ramp-up at the open, on Intel's improved guidance - but it disappeared by lunchtime... diddums).

    Major US Indices

    Intel (INTC, +5.28% to $23.91) raised its guidance for revenue, setting a new band. The bottom of the new band ($9.3-$9.5bill) is just above the top of the old band ($8.6-$9.2 bill).

    And didn't everyone get excited! Intel was up to $24.50 (a gain of 7.9%) in the early going, as people with absolutely no idea what they're doing dived in like a half-drunk idiot into a shallow creek. We know how that usually ends... with a sharp crack, and life in a wheelchair.

    Intel Intraday Chart...

    IBM (IBM, +1.38% to $97.08) announced that its Personal Computer division is up for sale... the prime candidate to take it over is Lenovo Corporation, from....

    Guess. (Hint: it ain't Kentucky)

    If you guessed China, well played. For those playing at home, consider the ramifications of this; the "inventor" of the personal computer has pretty much thrown in the towel, and the towel has been caught (and will be exploited) by the next global economic superpower.

    The dud of the Dow was Pfizer (-2% at $27.89), perhaps on news that the US government is importing 5 million shots of flu vaccine from GlaxoSmithKline due to shortage of supplies in the US.

    Funny stuff... the US government stops Americans from importing cheaper drugs from Canada as payback to Big Pharma (big election fund donator), then has to turn around any buy stuff in. I suppose that so long as they're buying from another major Pharma company, it's OK.

    The only other news about Pfizer was that is is submitting another drug to the FDA for regulatory approval.

    That's not the source of any downtick though...The FDA has been Big Pharma's bee-yatch since Donald Rumsfeld was CEO of Searle - when he used his clout to get Aspartame (a neurotoxin which failed safety testing dismally) approved despite howls from the FDA panel (who all got sacked). Hell, they approved Vioxx... and we know how that ended!.

    Another interesting tidbit: in November 2004, Insiders at US firms sold $6.6 billion worth of stock; that's the largest dollar value of stock since August 2000. We know what happened then, don't we, kiddies?

    The DJIA burst out of the blocks like a top fuel dragster, and showed about as much staying power. Check out the intraday chart...

    e-mini S&P Futures Intraday Chart...

    By the close, the Dow had added 7.09 points (0.07%), closing out the day at 10592.21 points; the broader S&P500 posted a rise of 0.84 points (0.07%), at 1191.17.

    Still, techs stayed up (again, mostly because of Intel). Over at Times Square, the Nasdaq Composite posted a rise of 4.39 points (0.2%), to close at 2147.96, while larger-cap technology issues were almost unchanged with the Nasdaq100 adding 1.25 points (0.08%), to end at 1614.4 points.

    NYSE Volume was solid, with 1.56 billion shares traded, while Nasdaq Volume was super-chunky (over 2 bill), with 2.41 billion shares crossing the tape.

    Nasdaq Composite2147.964.390.2%
    NYSE Volume1.56bn--
    Nasdaq Volume2.41bn--
    US 30-yr yld4.94%-0.11%-2.1%

    Market Breadth & Internals

    On the NYSE advancing Issues exceeded decliners by 2096 to 1233 for a single-day A/D reading of 863; and Nasdaq losers exceeded gainers by 1641 to 1458

    NYSE advancing volume exceeded volume in decliners by 854.99 to 680.89 million shares; Nasdaq advancing volume was greater than volume in decliners by 898.3 to 445.36 million shares.

    209 NYSE-listed stocks rose to new 52-week highs, and 3 posted fresh 52-week lows, while on the Nasdaq there were 145 stocks that hit new 52-week highs, and 10 which fell to fresh 52-week lows

    Advancing Volume (m)854.99898.3
    Declining Volume (m)680.89445.36
    New Highs209145
    New Lows310

    Market Sentiment

    Last night looked like the end of the road for the recent little counter-trend rally (at least for a while). That target of 1220 on the S&P still stands at this point - I will post some more on that as an addendum to Monday's OzRant - but there was some technical damage done last night.

    You wouldn't know that from the market internals (or breadth, for that matter), and sentiment is still as bullish as ever (or more so).

    CBOE Equity Call Volume (000)712.68-161.02-18.43%
    CBOE Equity Put Volume (000)351.11-256.09-42.18%
    CBOE Volatility Index12.96-0.02-0.15%
    CBOE Nasdaq Volatility Index18.26-0.38-2.04%
    Equity Put-Call Ratio0.49-0.2-29.11%
    10-day PCR0.57-0.0027-0.48%
    SPX-VIX Ratio91.910.210.22%

    Bond Market Analysis

    Bonds rose hard along the curve as the market got very spooked by the weak jobs data. The yield on the benchmark 30-year Treasury bond shed a whopping 12.9 basis points to 4.931%, and the 30-year bond futures (ZBZ04) rose 1&22/32 - a massive 1-day rise.

    Even the 2-year note rose sufficient to bring its yield down by 13 basis points; that's about the same drop as it would normally move as a result of a Fed rate cut!! (Hint: the bond market is pricing in slower tightening by the Fed).

    UST 2Y (yld)2.912-0.13-4.15%
    UST 5Y (yld)3.597-0.152-4.05%
    UST 10Y (yld)4.261-0.14-3.25%
    UST 30Y (yld)4.931-0.129-2.55%

    The Banks Index lost 0.86 points (0.84%), to 101.85; within the index,

    • the Derivative King - JPMorganChase dipped $0.38 (0.99%) to end the session at $38.06; and
    • Citigroup dipped $0.11 (0.24%) at $45.65

    The Broker-dealer Index advanced 0.78 points (0.53%), to 148.15; the ticket clippers lined up as follows -

    • Merrill Lynch advanced $0.53 (0.93%) closing at $57.28
    • Morgan Stanley Dean Witter added $0.93 (1.78%) to end the session at $53.07
    • Goldman Sachs lost $0.13 (0.12%) closing at $106.47
    • Lehman Brothers advanced $1.75 (2.1%) at $85.00

    The Philadelphia SOX (Semiconductor) index posted a rise of 6.57 points (1.5%), at 445.28

    • Triquint rose $0.07 (1.59%) to $4.47
    • Micron Technology rose $0.14 (1.23%) to end the session at $11.54
    • Intel posted a rise of $1.20 (5.28%) ending the day at $23.91
    • Altera rose $0.16 (0.69%) to end the session at $23.25
    • JDS Uniphase added $0.02 (0.63%) to end the session at $3.17

    Gold & Silver Markets

    The weak employment numebrs were very good for Gold and very bad for the US dollar. Gold strengthened by $6.50 (1.45%) to $456 per ounce. The Gold Bugs Index gained 0.47 points (0.21%), ending the day at 227.24 points.

    Silver rose $0.12 (1.46%) to close at $8.01 per ounce. The Gold and Silver Index (XAU) gained 0.64 points (0.62%), to end the session at 103.85 points.

    PHLX Gold and Silver Index103.850.640.62%
    AMEX Gold BUGS Index227.240.470.21%

    Oil Market

    Oil lost ground, shedding $1.11 per barrel (2.55%), closing at $42.46 per barrel. It's now dropped 16% in four sessions - mostly on hedge fund liquidations and technical factors rather than market fundamentals. It's now deeply oversold, and almost worth a try at the long side again - too many people are now convinced that $40 will be broken again, and if it is I will be a buyer.

    The Oil and Gas Index (XOI) posted a rise of 6.21 points (0.87%), to end the session at 717.34. The Oil service stocks (OSX) Index added 2.16 points (1.83%), at 120.25

    Reuters CRB284.70.20.07%
    Crude Oil Light Sweet42.46-1.11-2.55%
    AMEX Oil Index717.346.210.87%
    Oil Service Index120.252.161.83%

    Currency Markets

    The US dollar index was sold, and sold hard. Since my post (in the old IWL days) which showed a clear top formed on an hourly chart (I will find the link and post it on Monday), the index has dropped from near 120 to be within spitting distance of 80.

    If 80 breaks, friends, 75 and 70 will not be far away... but eventually this thing has got to bounce.

    US Dollar Index Chart...

    Notice something else? The Yen... didn't move (or hardly moved, more to the point). If and when the market stops thinking that the BoJ will intervene at some point, the dollar is going to get sicker than a tenderfoot tourist after a dodgy Beef Rendang (I know it's not Japanese food... it's almost impossible to get crook after Japanese food).

    US Dollar Index80.98-0.97-1.18%
    Australian Dollar0.78150.00760.98%
    Swiss Franc1.1306-0.0213-1.85%
    Canadian Dollar0.83930.00250.3%

    European Markets

    France's benchmark CAC-40 Index shed 27.94 points (0.73%), to end the session at 3783.51 points; the German DAX-30 Index slid 7.53 points (0.18%), ending the day at 4208.87; and in the UK, the FTSE-100 Index dipped 3.3 points (0.07%), to 4747.9


    Monday's Pivots (US Futures Market)

    R2106861202.371641113 26/32
    R1106321195.831626112 30/32
    Pivot105981191.771618.5111 23/32
    S1105441185.231603.5110 27/32
    S2105101181.171596109 20/32