The E-Mini S&P 500 absolutely spiked on the US Unemployment report Friday morning Within 5 minutes, the E-Mini S&P 500 went from $1323.00 to $1334.75 and then on to finish the day putting in a high of $1342.00. Analysts had forecasts in on the Non-Farm Payrolls report of 150,000, down from the previous reading of 200,000. The report came in at 243,000 new jobs created which dropped the jobless rate to 8.3% from 8.5%. This pointed to recovery.
Recovery in the US has been all about employment and housing, the strength in one area may bolster the other. Perhaps it was the warmer winter that helped construction employment add 21,000 jobs in January and 31,000 in the previous month. Regardless, it was positive, which brings us to the next question. Will the positive data change the outlook on the Fed policy? It is thought that the extended low interest rates possibly to 2014 and the loose monetary policy may remain as is to possibly further stimulus according to many analysts.
"Operation Twist" taken from the '60s is set to last until June. This is a $400 billion stimulus program where the short-term debt instruments are sold and the long-term debt instruments are purchased to hopefully keep longer-term rates such as mortgages low. Factory orders were up by 1.1% in December following an upwardly revised 2.2% increase in November. Analysts' expectations were for an increase of 1.5% in comparison to the 1.8% derived the previous month.
The Institute for Supply Management reported the services sector to advance to 56.8 last month from a revised 53.0 in December. The services sector represents about a third of the economic activity within the country. Anything over a reading of 50.0 points to expansion. The new orders index was up to 59.4 from 54.6 with the measure of prices paid rising to 63.5 from a previous 62.00. The employment index portion was up to 57.4 from the previous 49.8. More than anything, Friday was about re-establishing confidence in the US economy. Of the 283 S&P 500 companies reporting earnings so far, 60% have exceeded expectations. While the volume was good Friday and the tone was extremely bullish, the Euro debt crisis still is unresolved.
We began with Greece as one of the countries in need for a bailout and here we are still. Finance Minister Jean-Claude Juncker, of Luxembourg, had regarded the summit of the European Union as "largely insufficient" and further spoke of the Greek negotiations as "ultra-difficult". Greek Finance Minister Evangelos Venizelos announced that talks with private creditors on the bond swap were "one formal step away". They now think that an accord may be reached next week. There is more convincing to be done prior to any bailout disbursement.
The Eurozone leaders must authorize the spending cuts and labor reform as suitable in order to issue the aid. The troika of foreign lenders are to submit a report of the progress in Greece, then perhaps the $130 billion euro bailout may be dispersed. The troika have implied stricter measures such as lowering the minimum monthly wage, which is currently about $750 euros and also cutting holiday bonuses. The Eurozone leaders fear now that more money may be needed now to recapitalize the Greek banks, perhaps an additional $15 billion euros.
The bond swap is difficult because banks and insurers may suffer losses of about 70% of the Greek debt that they own. It is also a concern that Greeks have cashed out of their indebted Greek banks and possibly have moved the money home or in safety deposit boxes. This definitely reflects the loss in confidence of the euro FX. Central bank findings had found business and household deposits decreased by $35.4 euros last year.
In order for the Eurozone to ever make it to sustainable economic levels, they must boost confidence and productivity within the country. The increases in revenue must be reasonable for each country to endure economic struggles over time. Goods and services must be in demand and exported to bring revenue and jobs into the country. The disbursements of aid must boost the ability of the country to create more jobs and increase their economic activity.
Iran had been accused of working with enriched uranium beyond the usual 3.5 % and actually to about 20% which designates the purpose to military usage. At this level, the uranium is at weapons grade material. Sanctions have been placed on Iran by the US and the European Union as of July 1st. Since, the Iranian leader has offered to meet and talk with the NATO inspectors.
At this point, US Defense Secretary Leon Panetta has concerns about Israel possibly bombing Iran to prevent the creation of a bomb from Iran. Israel is believed to have the only Middle-East arsenal to date. They have a vulnerable location and the anxiety is tremendous as Iran has managed to bury the site at Fordow about 260 feet underground. We remain cautiously bullish on the E-Mini S&P 500 and will look for signs of a reversal possibly the latter part of next week.
On the stock side: JP Morgan Chase and Co. (NYSE:JPM) was up 1.99 % to $38.30. Citigroup Inc. (NYSE:C) was up 4.00 % to $33.27. Bank of America (NYSE:BAC) was up 5.10 % to $7.82. Alcoa Inc. (NYSE:AA) was up 3.07 % to $10.74. Boeing Co. (NYSE:BA) was up 1.49 % to $76.34. Caterpillar Inc. (NYSE:CAT) was up 3.24 % to $113.91. General Electric Co. (NYSE:GE) was up 1.33 % to $19.00. Halliburton Co. (NYSE:HAL) was up 0.79 % to $36.83. Hewlett Packard Co. (NYSE:HPQ) was up 1.93 % to $29.05. SPDR Select Sector Fund - Financial (NYSEARCA:XLF) was up 2.51 % to $14.71.
Monday, we have no major US economic reports.
E-Mini S&P 500 Chart.
Monday, what to expect: We maintain a bullish bias unless the E-Mini S&P 500 penetrates $1296.00. Monday, we anticipate an inside to higher day. Friday's range was $1342.00 - $1320.00. The market settled at $1339.00. Our comfort zone or point of control for this market is $1332.50. Our anticipated range for Monday's trading is $1348.50 - $1322.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.