Sunday, June 04, 2006

Friday Jobs Disappoint

The Friday jobs’ report was quite a bit weaker than expectations, so what did the various markets do?  Before we start that discussion, we should probably mention what the news means—but you already know it means the Fed can back off.  So, the first market that comes to mind is the dollar, which, of course, was down on the back of that news.  The stock market based on the Dow was up a bit in the early going but failed to hold any of those gains.  The bond market thought the jobs’ news was great and popped at the opening and held its gains all day long.  Gold and silver were also pretty solid.

The Dow and other indexes opened on the high of the day and for the first few hours we were thinking that the next drop was becoming a reality—but that was not to be as the indexes managed to find a low in midday trading and then rallied modestly into the close.  The SP 500 was actually up on the day.

The new week holds some possible market moving information points such as the ISM Service index tomorrow which is expected to decline to 60 from last month’s 63.  Tuesday brings the retail sales index along with some consumer confidence numbers.  Wednesday has consumer credit and Friday holds the trade deficit numbers.  We don’t expect much movement off these numbers but if there is movement, these numbers may be hauled out as the “reason” for the moves.  

We still think the market is pining for a stop in the Fed’s relentless 25 bps rate increases that we have seen for the last 17 meetings in a row.  Their meeting (FOMC) will be held at the end of the month with plenty of time for further weakness in the data points.  We will keep watching and waiting.

We think the correction (of the down move we saw over the last month) is about over and we should be seeing some more decline in the market coming up soon. We really felt that Friday held a good chance to be the top of the correction but we may be disappointed.  We have learned that the market has a lot of excess liquidity built into it so there could be more rally to come—we remain short.  When credit standards start to tighten up, the liquidity brought to you by the incredible housing market will dissipate quickly.

Be careful out there.

Dow Industrials:  11,247.87  -12.41
RYVNX:   20.58
RYAIX:  23.24
TLT:  84.79
BEGBX:  13.69

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