Friday, December 4, 2015

US Monthly Jobs Report 12/4/15 Market Reaction in Real-Time

The circus is back in town with the US Monthly Jobs Report on tap. At 8 AM, S&P +4. Dow +30. Nasdaq +5. DAX and CAC are each down -0.7%. FTSE -0.3%. MIB -0.1%. IBEX -0.8%. 

A few minutes in front of the jobs report, S&P +4. Dow +30. Nasdaq +3. DAX -0.9%. CAC -0.5%. FTSE -0.3%. SMI -1%. Euro 1.09. Euro/yen 134.08. Dollar/yen 122.99. Pound 1.5141.

WTIC oil 41.80. Brent oil 44.77. Naturla gas 2.19. Gold 1069. Silver 14.28. Copper 2.078.

US Treasury yields are; 2-year 0.95%, 5-year 1.72%, 10-year 2.30%, 30-year 3.06%. German bund 0.692%.

The Monthly Jobs Report is immensely important since it is the last report before the Federal Reserve must provide its decision on raising interest rates on 12/16/15 only 12 days away. The key is wage growth since inflation, that the Fed is trying to create with their obscene Keynesian money printing policies, cannot exist without wage inflation. The Fed’s grand 6-1/2 year economic experiment in quantitative easing and extraordinary measures is a failure if inflation does not occur. Average hourly earnings are forecasted to rise +0.2% below last month’s robust +0.4% gain.

The consensus expects 190K jobs with a range of predictions from 160K to 219K. Last month was a strong 271K jobs which placed the future Fed hike firmly on the table. Any revisions are important. Economists and analysts are all over the map with the jobs report with a separate consensus study predicting 200K jobs from a range of 150K to 275K. Thus, the broad consensus is for 190K-200K jobs. Any number over 150K will be enough for the Fed to forge ahead with its plan to hike rates on 12/16/15. A number below 150K jobs, or a flat to negative wage number, will create headaches for the FOMC.

Analysts agree that the unemployment rate should remain unchanged at 5.0%. The prior labor participation rate is 62.4% remaining the lowest in nearly 50 years. The average workweek is expected to remain at 34.5 hours.

At 8:30 AM EST, the Monthly Jobs Report is 211K jobs and an unemployment rate of 5.0%. Average earnings are +0.16%, call it +0.2%. Wages are up +2.3% over the last year. The data comes right in line with expectations. Traders will fully expect the Federal Reserve to provide the first rate hike in a decade on 12/16/15. Interestingly, the Fed would likely rather have wage growth at +4% and higher to hike rates but it looks like they will forge ahead anyway with wages rising at a +2.4% clip. This may prove to be a critical error.

The prior month revisions are higher which will make the FOMC happy. October is revised up 27K jobs from 271K to 298K jobs. September’s 137K jobs are revised 8K higher to 145K jobs. The last two months of revisions add 35K jobs. Over the last three months, the job gains average 218K per month.

197K jobs are created in the private sector. The Whitehouse talking heads will tout this as “69 consecutive months of private sector job growth.” As long as the number is positive they will keep adding one digit each month and repeat the mantra; a non-stop positive talking point. Construction jobs lead the parade up 46K. That is odd considering the northern hemisphere is heading into winter time. Professional and technical jobs are up 25K. Healthcare-related jobs up 24K. Retail jobs gain 31K. Mining jobs tank by -11K jobs. Over the last year, the mining sector has lost 123K jobs.

The broad measure of unemployment in the economy, the U-6 number, is 9.9%, up +0.1%. This is a fly in the ointment. The U-6 is monitored closely by Yellen. The U-6 rate was at 11% last December. The labor market has not completely healed. The labor participation rate is 62.5%.

The US futures reaction is muted. S&P +6. Dow +50. Nasdaq +7. Treasuries are a different story. Since the Fed will likely move with a rate hike in 12 days, traders are selling bonds and yields are popping higher. The 10-year yield is up to 2.34% in a flash and then climbs to 2.351%.

Euro 1.0891. Dollar/yen 123.16. Pound 1.5105. WTIC oil 41.63. Brent oil 44.65. Natty gas 2.182. DAX -0.6%. CAC -0.4%. FTSE -0.2%.

International Trade data shows a trade deficit at the high end at $43.9 billion versus the $40.6 billion expected. Last month’s trade balance was $40.8 billion. Soft foreign demand and oil prices are impacting the numbers. Exports fall -1.4% and Imports drop -0.6%.

At 8:34 AM EST, S&P +10. Dow +83. Nasdaq +15. Euro 1.0870. USD 98.43. 2-year yield 0.99%. 5-year yield 1.78%. 10-year yield 2.355%. Gold 1062. Silver 14.145. Copper 2.0715.

S&P +11. Dow +96. Nasdaq +17. DAX -0.3%. The CAC and FTSE are flat. Euro 1.0885. Dollar/yen 123.18. Pound 1.5094. 10-year yield 2.347%. WTIC oil 41.66. Brent oil 44.66.

At 8:52 AM EST, Treasury yields retreat from the initial bump higher after the jobs report; 2-year 0.95%, 5-year 1.74%, 10-year 2.32%, 30-year 3.07%. The 2-year yield teasing the 1% level yesterday and today but is unable to tag the psychological whole number.

An OPEC oil minister comments that the cartel plans to slightly increased its oil production targets. Oil prices tank. WTIC oil drops -1.3% to 40.62. Brent oil drops -0.8% to 43.55. Natty 2.17.

At 8:54 AM, S&P +4. Dow +28. Nasdaq +8. WTIC oil 40.24. Brent 43.11. Euro 1.0898. Euro/yen is above 134 to 134.06. Dollar/yen 122.92. Pound 1.51.

Over the last one-half hour, futures reverse off the joyous gains. At 9:09 AM EST, US futures are negative and European stocks are running lower. S&P -3. Dow -29. Nasdaq -2. DAX -1.3%. CAC -1.2%. FTSE -0.8%.

Oil is tanking with WTIC losing the 40 level to 39.81. Energy, oil and gas stocks are leaking lower driving the broad market lower. WTIC oil 39.76. Brent oil is under 43 to 42.83. The official OPEC announcement has not yet occurred but the oil traders are smashing oil prices lower on earlier comments.

S&P flat. Dow -8. Nasdaq +1. Euro 1.0927. Dollar/yen is sticky at 123 and pound is sticky at 1.51. US 10-year yield 2.31%. German bund 0.69%. Gold gains 10 bucks to 1071. Silver 14.26. Copper 2.06.

At 9:30 AM, US equities begin the day floating higher. Financials, utilities and telecoms lead higher. XLF +0.7%. XLU +0.6%. IYZ +0.5%. Regional banks move higher on hopes the yield curve will steepen. PNC +0.8%. KEY +0.5%. RF +0.3%.

Energy stocks are in collapse. XLE -1.8%. WTIC oil 40.21. West Texas crude has dipped below 40 and recovered back above three times over the last couple weeks. The pivot from the 40 level is extremely important for the path ahead for oil prices.

Stocks begin melting-up. The SPX is up 16 points, Dow 144 points and Nasdaq up 41 points. The major indexes are driven uniformly +0.8% higher by the trading robots and algo’s. VIX 17.06. Euro 1.0905. USD 98.00. DAX -0.6%. German 10-year bund yield 0.68%.

The bulls are throwing a party. S&P 500 is up 20 points. The Dow gains nearly 200 points. The Nasdaq is up 50 points. Euro 1.0925.

Market bulls are happy with the SPX above its 200-day MA at 2065, 10-month MA at 2056 and 12-month MA at 2055. Market bulls win big above 2055-2065 while bears win big below SPX 2055-2065. Market bears remain in the game since volatility remains elevated. The VIX remains above the 200-day MA at 16.26 so the bears are currently not concerned about the rally. VIX 16.84.

Market bears are punched in the gut as the VIX drops under 16.26. This drama with volatility and fight at the VIX 16.26 level will continue today and determines market direction.

(the drama continues on the Keystone the Scribe sister site that explains the daily market machinations)

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