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Daily State of the Markets To listen to an Audio Version of the report, click on the Play button below:
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Publishing Note: Markets are closed on Friday and I am traveling Monday morning, July 6th. Our normal morning report publishing schedule will resume Tuesday July 7th.
Good morning. As long-time readers are well aware, I’m kind of a stickler for keeping the big-picture in focus. And as anyone who has ever clicked a buy button will attest, this can be tough at times with all the news, noise, and flashing screens distracting us during the trading day. In fact, the primary reason I pen (er, type) a daily market missive is to make darned sure that I stay focused on what is driving the market. The idea is that if we can stay in tune with the action on a daily basis, then we ought not be surprised when the big picture environment changes.
With stocks now having gone sideways for the better part of two months and the market appearing to often times have very little memory from one day to the next, I am here to say that it is VERY easy these days to lose sight of the big picture. And since it is also VERY easy to find someone these days who agrees with your view, instead of seeking agreement, the goal should be to try and avoid all the so-called expert opinions and make sure to stay objective.
Getting to the point, we are of the mind that the market remains data dependent right now. We’ve had the undoing of the Armageddon discount and we’ve also probably seen a little discounting of better days ahead for the economy. So, at this stage of the game, those of the bullish ilk need to see some actual improvement in the economy in order to justify a continuation of the “mini bull” trend.
Thus, it becomes vital to be able to decipher the data that we’re hit with on a daily basis. Yes, I understand that trudging through economic data is torture for many investors. However, at this point in the game, it is critical to be able to understand what’s actually in the reports instead of letting T.V. commentators decide what makes for the best headline.
For example, the ISM Manufacturing Composite didn’t get much air play yesterday. However the message from the data was fairly important. The headline read that the ISM composite came in at 44.8, which was slightly below the consensus for a reading of 45.0. But, if you only checked the headline (and come on, admit it; how many even looked at this headline?) you might have been led to believe that the report was a bit disappointing.
However, the 44.8% reading was the highest since last August. And more importantly, the index, which is designed to indicate the state of the manufacturing sector, remained above the key 41.2% level that has historically been consistent with an expanding economy. I could go on, but in short, the ISM said the report was “encouraging” and added that “a recovery for manufacturing is forming.”
So, if you find yourself stuck in the bitter barn and preparing for the economic disaster that has already happened – please snap out of it! The bottom line is the economy IS turning. And while the ride is likely to be bumpy, it might just pay to try to stay upbeat about the big picture over the next 6 months or so. This does NOT mean that we won’t see a correction in the near term for just about any reason. However, for now at least, we’d give the bulls the benefit of the doubt.
Turning to this morning, we’ve got the Big Kahuna of economic data now available, so let’s get right to it. The Labor Department reported that nonfarm payrolls fell by 467K in June, which was worse than the consensus estimates for a drop of 356K jobs and May’s reading of 345K. The Unemployment Rate actually came in a tenth below expectations at 9.5% but is up a tenth from May’s 9.4% rate. And then, weekly Jobless Claims were pretty much on target at 614K vs. 615K.
Running through the rest of the pre-game indicators, the major overseas markets are lower across the board. Crude futures are moving down with the latest quote showing oil trading lower by $1.56 to $67.75. On the interest rate front, we’ve got
