POSITIVE DATA PUTS PRESSURE ON STOCKS - By WSS Research Desk
Long/Short Equity, Portfolio Strategy
Seeking Alpha Analyst Since 2008
By Carlos Guillen
Quite interestingly, despite rather encouraging economic data out this morning, equity markets are experiencing somewhat of a small selloff, perhaps as signs of an improving economy raise concerns of the Fed doing further tapering sooner rather than later.
The jobs data posted before the open of the stock market has served as yet another indication that the economic backdrop here at home is slowly continuing to improve. According to ADP, non-farm private sector jobs increased during December by 238,000, better than economists' average forecast calling for a 203,000 increase. Also rather encouraging was that non-farm private sector jobs gained in November were actually revised higher from 215,000 to 229,000. This stronger than expected uptick in added jobs is certainly indicative of stronger-than-expected nonfarm jobs this Friday, when the official government jobs data is released.
The data showed that payroll gains were achieved across the board but were predominantly driven by small businesses, which added 108,000 jobs. Large business payrolls increased by 71,000 and medium businesses added 59,000. Not surprisingly, most of the added jobs came from the services sector, which ADP said added 170,000 jobs, but also encouraging was that the goods-producing sector experienced a gain of 69,000 positions. At the moment, economists are predicting that the government's numbers, to be released this Friday, will show that private sector businesses added 198,000 jobs in December and that the unemployment rate likely declined from 7.1 to 7.0 percent.
Clearly, the phenomenal numbers from the trade deficit data presented yesterday and the better-than-expected jobs numbers shown today are strengthening the case for further tapering of the Federal Reserve's bond-buying program, which boosted equities last year. Ironically, stocks are trading lower, with the Dow Jones Industrial Average currently down over 70 points. Nonetheless, with signs that the economy is improving, stocks should move higher from a longer term perspective. Shortly we will get a glimpse at the minutes from the Fed's December 18 meeting, when the central bank decided to slightly taper its bond-buying program. As such, we can expect further volatility.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.