Daily State of the Markets
Other than another nice batch of global economic data, perhaps the most important aspect of Thursday's market activity was that the wait for Friday's jobs report was finally over. Although the trading was a bit volatile due to the lack of participation by top tier traders, who were likely either at the beach or on the golf course, the blue chip indices did manage to finish with a nice gain for the week. And for those of you keeping score at home, stocks have now closed higher for five consecutive weeks and in seven of the last eight weeks. As such, it is safe to say that this remains a bull market until proven otherwise.
Stocks got off to a strong start Thursday in response to a plethora of better-than expected economic data from overseas markets. Let's see... Japan's Tankan survey improved nicely; China's Purchasing Managers Index (PMI) improved to 55.1 in March from 52.0 (recall that readings over 50 are indicative of expansion); and the PMI's from the UK, France, Germany, Italy, Switzerland, and the EuroZone all came in above expectations.
Here at home, the news was encouraging on the economic front as well. Probably the most important piece of data came from the ISM Manufacturing Index, which rose to 59.6 in March from 56.5 in February. The reading confirms that the expansion continues in the manufacturing sector as this was the highest level seen since July 2004.
It was also encouraging to see that the New Orders component increase to 61.5 while the Production component rose to 61.1 from 58.4. In addition, the inventory component continued to climb. And finally, the ISM report showed that the Export Orders index jumped to 61.5, which was the highest level in more than 20 years (guess that falling dollar is good for something after all!). All of the above helped the bulls get behind the global recovery trade as the commodities and material stocks enjoyed strong gains across the board.
However, the Main Event occurred when everyone was at home in their pajamas as for some reason, the Bureau of Labor Statistics insisted on releasing the March Nonfarm Payroll report when the stock market was closed for the day. By now, I'm sure you are aware of the fact that the economy created 162,000 jobs in March. Although the total number of new jobs was a bit below the expectations for something on the order of 180K - 200K, it was actually an encouraging report.
The big surprise in this report was the number of census jobs that were added or, in this case, not added. Expectations were for the government to have hired 130,000 census workers. However, the Labor Department reported that just 48K jobs were added to the census payrolls in March. (It is expected that nearly 650,000 workers will be hired to work the census by May.) The good news is with only 48K new jobs related to the census, this means the private sector produced 123,000 new jobs, which was well above the estimates for a range of +15K to +55K. This marks the largest number of new jobs in the private sector since May 2007.
And when you add in the revisions to the prior two months, it is becoming quite clear that both the economy and the jobs market have turned the corner. Of course, the question now becomes, to what degree has the stock market already discounted this fact (the S&P is up 74.1% from the March 9th low) and how much more upside is available?
Turning to this morning... We don't have any economic data to review before the bell but we will get reports on the ISM Non-Manufacturing Index for March as well as results for Pending Home sales from February at 10:00 am eastern.
Running through the rest of the pre-game indicators, the majority of the major overseas markets were closed in observance of Easter Monday. Crude futures are up $0.60 to $85.47. On the interest rate front, the yield on the 10-yr is currently trading at 3.96%. Next, gold is moving up $2.10 to $1128.20 and the dollar is higher against the Yen, Euro, and Pound. Finally, with about 60 minutes before the bell, stock futures in the U.S. are pointing to a higher open. The Dow futures are currently ahead by about 25 points; the S&P’s are up about 4 points, while the NASDAQ looks to be about 6 points above fair value at the moment.
Wall Street Research Summary