Keystone's Morning Wake-Up 2/1/13; Monthly Jobs Report

Happy February. The China PMI disappoints but remains a hair above 50 indicating expansion. The HSBC number released a couple hours later, however, thought to be more reliable, was up a touch so traders like this number better. Copper is buoyant but not the huge move higher that would be expected with better China news. The euro/dollar explodes higher towards 1.38, a phenomenal currency move overnight. Higher euro means higher equity markets and the futures are up ahead of the Monthly Jobs Report at 8:30 AM EST.  The dollar/yen jumps over 92 levels not seen since 2010 well over two years ago. The U.S. and Japan are weakening their currencies while Europe watches. The ECB meeting next Thursday will be a huge event. Europe needs growth and may force Draghi's hand to produce a rate cut. Spain is selling off again today as banks are hit after the short-selling ban is lifted. Eurozone unemployment remains stubbornly high at 11.7%.

But it is all about the Jobs Report today. The consensus is 165K jobs and an unemployment rate of 7.8%. Last months number was 155K. The ADP Job Report this week was 192K so this helps fuel the high expectations now in place. Traders are looking for a number north of 200K which may be priced into the markets. The enthusiasm has grown over the last couple days so there is an increased chance of a downside surprise. Most traders are on one side of the boat expecting a blow-out jobs number over 200K. The January 2012 number was north of 200K which excited everyone one year ago but it rolled over and things went downhill after that. Interestingly, the recent job cuts in the financial sector, thousands of jobs, do not appear to have had an impact. Granted many of the planned cuts will occur over time and through attrition, however, perhaps the financial layoffs will weaken the number. Construction jobs may have surged a bit further which would boost the number.

Markets are completely flat this week. Traders have been waiting for the jobs number all week long.  The Consumer Sentiment and ISM numbers at 10 AM will create a market pivot point so the morning offers lots of drama ahead.  The consensus in the markets is that a shallow pull back will occur, and yesterday may have been it.  When SPX 1500 gave way yesterday, more downside would have been expected so there is a supportive bid under the markets. With everyone expecting only a shallow pull back that should provide reason for skepticism.

UTIL 475.49 will provide an early guage for next weeks trading.  If UTIL closes near or above 475.49, then next week will be set up to strongly favor the bulls and the path to SPX 1520's. If UTIL is weak today and moves lower, bears can take comfort over the weekend. For the SPX today, starting at 1498, the bulls need to push up thru 1504 to create an upside acceleration towards 1511. The bears need only one point lower, to push under 1497, and this will create a downside acceleration that would surely slice straight down thru the strong 1495-1496 support in quick order.   A move thru 1498-1503 is sideways action but considering the data on tap, a direction will likely be chosen. The 10-year yield is 2.00%. A higher yield, 2.01% and higher will create happy equity bulls. A move lower in yield, 1.99% and lower, will create happy bears. The trio of data, Jobs, Sentiment and ISM will tell the tale.  Whoopsies daisies. Copper turned negative as this missive was typed.

Note Added 2/1/13 at 8:37 AM:  The deer remains frozen in the headlights. The Jobs Report is 157K jobs and 7.9% unemployment rate. The 200K number is on a milk carton. The rate bumps up a tick and the jobs number is disappointing. However, the prior two months were revised upwards, over 200K, so the markets are factoring that into the reaction. Futures are relatively tame, up about 4 to 6 S&P's before the news, now up 7 to 8.  The average hourly work week is 34.4 unchanged and average hourly earnings were up 0.2% compared to 0.3% last month. This is nothing to write home about and does not foretell an increase in hiring; companies are doing fine with the existing employees. The futures remain buoyant but the 10-year yield drops to 1.97% now recovering to 1.99%. WTIC oil is down at 97.32 but Brent is over 116 on the Middle East unrest. Pipelines move oil thru Turkey so the explosion is causing the move in Brent. Copper remains red. The Consumer Sentiment and ISM Mfg Index at 10 AM takes on added importance. Looks like the SPX will attack the 1504 level to try and bust up thru at the open.