A "just right" jobs report has encountered some investor resistance as Goldilocks has her fill of the good stuff leading into Friday's latest and greatest storied headlines. As of 10:45 ET, the S&P500 ($SPX) and NASDAQ Composite ($COMPQ) have reversed the early cheer as they attempt to hold onto tepid gains of .09% to .12% respectively.
Goldilocks was served up a nice triple shot of economic relief that affords the bulls the declaration that any looming recessions are officially on the back burner. 100,000, 4.6% and .3%, that's what Wall Street was looking for in Friday's jobs report casting call. What it received was payrolls increasing by 97,000, unemployment of just 4.5% and slightly higher hourly wage increases of .4%. The combination might not sound "just right" on first inspection, however, revisions and spinning a yarn, two of Wall Street's specialties, need to be considered to truly appreciate the bull of it all.
The 3,000 miss in nonfarm payrolls isn't a big deal, particularly so when traders were bracing for a verdict far removed from the consensus estimate of 100,000 and a result which might validate recent concerns over the "R" word. The result also excludes an upward revision of 55,000 for the December and January periods and puts the overall stat on track for a 1% annual growth rate. According to analysts the new data is consistent with real GDP growth approaching 3% and a figure apt to provide bullish relief.
Potentially a bit more problematic is the hourly earnings increase. However, the bulls appear to be making the best of the situation. It seems that while wage pressures have been high on the inflation totem pole for the Fed, today's .4% hourly earnings increase can be spun just enough so bulls looking for a happy ending might be satisfied. In this case, instead of focusing on a year-over-year increase of 4.1% and real wages rising 2% during the same time, the spin is predicated on higher pay resulting in future consumer spending. For a market trying to remove the word ârecession' and recent painful market declines from its memory banks: it is what it is, until Wall Street shifts the popular opinion factor once more.
On the corporate front, a couple of earnings reports are delivering decidedly mixed results. Homebuilder (XHB) Hovnanian (HOV) is pursuing further deconstruction of the bottom foundation. The company's Q1 results swung to a wider than expected loss of $.91 per share. Management also sided with DR Horton's (DHI) bearish declaration Wednesday evening, as it cut guidance and said it's unwilling at this time to call a bottom in the housing market. On the report DHI is off 35 cents at 24.43.
Elsewhere, semiconductor stocks (SMH) are attempting some leadership on an optimistic forecast and upgrade of two sector heavyweights. A mediocre report from National Semi (NSM) is finding willing buyers as the stock trades higher by one-point to 26.28. The enthusiastic response which vaulted the stock to nine-month highs came courtesy of bullish guidance by management. Texas Instruments (TXN) is tacking on gap gains of 75 cents to 32.45. In part, some of today's fan appreciation day comes courtesy of two analyst bump ups from second-tier brokers JMP Securities [to "outperform"] and Stifel Nicolaus [to "buy" & $40 target].
GROWTH & MOVERS COVERAGE
Industry / Sector
RS / EPS 1YR%
Select reports scheduled after the market close and in the premarket:
Industry / Sector
Q-Estimates / Prior Yr.
.19 / .09
.29 / .19
Economic releases on tap:
Wall Street Forecast
INDICES & MARKET MOOD
Let's face it: what the bulls proclaim to need and ultimately how it reacts is rarely the same thing. Now that a rate cut once more appears to be out of the market equation, bulls are quickly announcing that it's alright by them, as long as they aren't presented with a recession. Realistically, the only Holy Grail for investors would probably have to take the form of lower rates, satisfying and always surprising growth in the economy and an end to inflation altogether. However, I'm sure since this is the market we're talking about, even that would present its share of not so pleasant wiggles and giggles to keep things interesting.
Friday marks day number one of the official follow-through day or FTD count. But, in lieu of Thursday's gap and Friday's resistance to that same action, bulls shouldn't be so quick to act. Throw in a fast and slightly overbought approach into potential supply clearly removed from the tarmac of the bounce low, and that point is solidified. On the other hand, nothing is ever so black or white when it comes to being 100% bullish, bearish or sidelined and waiting. Nonetheless, as it relates to growth stocks attempting to reclaim some of their recent glory by breaking out of classic bases, this market observer believes time is still on our side.
Index or Sector Proxy
S&P500 ETF (SPY)
Neutral / LT Bear
138.05, 136.20 - 137.50
141.80 - 143
NASDAQ 100 (QQQQ)
Neutral / LT Bear
41.75 â 42.25, 40.60, 39.40 - 40
43.25 â 44
Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.