TB’s Wine Quote of the Day: “In victory, you deserve Champagne. In defeat, you need it.” – Napoleon Bonaparte…is it pronounced Bone-a-part?…or Bone-a-partay? Dunno.TB
Bloomberg Quote of the Day: “It’s not so important who starts the game but who finishes it.” – John Wooden…great quote from the ‘wizard of Westwood’..and winningest coach ever. Reminds one of Knute Rockney’s (we went to school together) “a fighting team is never licked.” To diverge a bit, former House Speaker Tip O’Neil’s autobiographical quote on showing then president-elect Reagan his office desk which had belonged to Grover Cleveland. O’Neil was shocked when Reagan said, “I played him once.” Oops, Gipper, that was Grover Cleveland Alexander!!! The man had ‘depth’…and brought us Supply Side Economics…what a gift! TB
U.S. Non-Farm Payrolls rose by 252k in December in line with consensus 242k. Construction added 48k jobs (highest in 3 months), but Manufacturing just 17k (lowest in 3 months!), while Government added 12k jobs. Private Service-Providing firms added 173k, also lowest in 3 months, Leisure & Hospitality just 36k another 3 month low as was Retailing which plunged to 8k. Financial fell to 10k from 21k, Professional/Business Services 52k vs 87k with sub-category Temp Services 15k vs 24k, also a three month low! The Average Workweek was steady at 34.6 hours while Average Hourly Earnings DECLINED to $24.57 from $24.62 which was a blip up. So you see, not drilling down can be hazardous to your health!
The Unemployment Rate declined to 5.6% – lowest since and below the forecast of 5.8%, BUT…yes, another but…the Participation rate held steady at 59.2% just above the 58.6% multi-decade low from a year ago! Is that good when 40% of the labor pool isn’t even employed? Also, part-timers for economic reasons only declined to 6.79% from 6.85%, and while there were slight gains in Duration of Unemployment, those out of work for more than 27 weeks increased to 31.9% +0.9%. So here’s the real deal: 5.6%, plus discouraged workers, 6.7%; plus part time for economic reasons, 11.1% (+0.1% and only down from 13.0% a year ago), THAT is the U-6 unemployment rate and a far more important number.
Remember, that we are only adding jobs at slightly more than new workers come into the labor force…that is not sustainable for sound growth.
Market Reaction (6am EST): First note that Bill Gross stated that the jobs growth it not sufficient to sustain economic growth – something TB has said for months and the reason that the country will be at risk of recession IF the Fed tightens (especially with Europe now slipping into recession and worse deflation!). Bonds’ bi-furcated with 10 year 2.01% +1/16; while the long end is off 1/8 at 2.61%, and long TIP -1/4 at 0.74%. All are slightly better than their lows, but confused. Dollar little changed while Gold is slightly higher and Crude is slightly weaker. Stock futures giving up most of their gains: DOW +8; SPX +2.30; NDQ +11.50
Overnight Global Markets – pre-payrolls:
European equity markets weak meaning Thursday was a ‘dead cat bounce’; Asia up slightly led by Korea (the volatile Nikkei over past 7 sessions is little changed): UK -0.7% vs +1.2% vs -0.3% vs -1.5% vs -0.2% vs +0.3% vs -1.1%; France -0.7% vs +1.2% vs +0.4% vs -2.6% vs -0.3% vs +0.6% vs -1.2%; Germany -0.6% vs +1.2% vs +0.9% vs -2.3% vs -0.6% vs closed vs -1.2%; Japan +0.2% vs FLAT vs -3%!!! vs -0.2% vs closed 2 days vs -1.6%! Hang Seng +0.4% vs +0.8% vs -1%! vs -0.6% vs +1.1%! vs +0.4% vs -1.1% vs +1.8%; Korea +1/1%! +0.1% vs -1.7%!!! vs.-0.6% vs +0.6% vs closed vs -0.6% vs -1%; India -0.3% vs -3%!!! vs -0.2% vs +1.4%!!! vs +0.4%. U.S. equity futures consolidating, Dow gapped down on the open: DOW +56 (range 55 +5 gap); SPX +6.20 (8 +1); NDQ +8 (14 no gap). Might be a different story after payrolls.
Global Money Markets: Libor: 0.252% 3 mos.; 0.361% 6 mos., steady overnight. With ’deflation’ in the air in Europe is that a surprise? …yet we are ‘afraid’ the Fed will tighten??? Think what that would do to Europe!!! (Note that the three dissenters at yesterday’s FOMC meeting were opposed on ‘philosophical’ not fundamental grounds. Funds rate has average is 0.09% and is now 0.12-0.14% – 0.14% is the 9-month high. T-Bills: +0.01%, one-month; 0.02%, 3 mos; 0.23% – back from 0.25%, the recent high!
Bonds: Got beat up plus the prior day’s minor losses, but still managed to hold on to some of the prior three days of rally. Movin’ on up overnight but still well above yesterday’s lows: 10’s 2.02% -7/16; 30’s 2.60% -1-9/16; Long TIP: 0.73% -5/16. Coming off the best year since 2002, warning flags abound because IF the Fed tightens, the correction could be huge and if not? Where can they possibly go from here?
European Bonds: mixed with small changes…most was Greece +9 – note all others hit new 12-month lows Monday. (Benchmark is 10yr): Germany 0.51% –; UK 1.63% -1; France 0.79% -1; Italy 1.84% –; Spain 1.68% +2; Portugal 2.60% +3; Greece 9.84% vs 10.19% vs 10.29% vs 9.43; look at the last 18 days range: 7.03% to 10.29%!!! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.26%! -2.
Dollar: slightly weaker overnight: Euro: $1.1816 off lowest since 6/2010!!!; Sterling $1.5143, off lowest since 8/13; Yen slightly higher after plunging for three days, now 119.86, failed rally on 1/7 to 118.06 – it has been weak since 8/14: 105!
Commodities: Gold slightly higher in quiet trading ahead of U.S. payrolls weaker but session low is $1207, leaving $1200 intact – at least for now. Silver, slightly lower but remains in the $16-16.50 range for a fourth day, currently $16.31; Crude traded up to $49.61 but that rally (?) fizzled leaving resistance at $49, with Wednesday’s cycle low at $46.83 – minor support with next at $40! Major resistance at $50, then $53-59. Yesterday was uneventful. Currently $48.61 -.18…still betting on LOWER. Went out yesterday afternoon and saw $1.95 a gallon…returned in the evening and it was $1.89…why don’t they dump that 9/10’s for God’s sake? Beats the hell out of TB!
Thursday’s Market Summary:
Stocks rallied sharply, making TB the fool, but notice this again…ALL indices were up from 1.7% (Russell 2000) to 1.9% (NDQ 100), EXCEPT Dow Transports +2.2% AND Dow Utilities +0.8%…something smells in Denmark besides the cheese…
Volume rose slightly, A/D’s and Breadth were both more positive, new 52 week highs rose while new lows were halved, and the S&P VIX fell to 17.01 -2.30, after gapping down from 19.04 to 18.09…BUT remain negative.
Total NYSE Volume slightly higher but still not high enough to confirm the rally at 3.92B shares vs 3.79B vs 4.44B vs 3.77B vs 2.7B vs 2.55B vs 2.42B – 12/24’s 12-month low was 1.4B shares. Shares traded on the NYSE floor came back to 848M shares vs 778M vs 942M, highest since 12/19. vs 845M vs 646M – 12/24’s 349M was the 12-month low…average is 734M shares! So far this week the average is 853M – mostly to the downside.
Advance/Decline’s remain solid but offset by the volume: NYSE: +3.3x vs +3.2x vs -2x vs -3.3x! vs +1.2x; Nasdaq +2.9x vs +2.1x vs -3.2x! vs -2.4x vs -1.3x; Breadth was strong: NYSE +5x!!! vs +2.8x vs -2.5x vs -7.3x!!! vs 1:1 vs -3x! Nasdaq +4.4x!!! vs +2.5x vs -3.3x! vs -4x!!! vs -1.3x. New 52 Week Highs rose again to a strong 342 vs 283 vs 206 vs 144 vs 148 – their range for the last 12 mos. is 39-612!!! New Lows were halved to a weak78 vs 158 vs 223 vs 143 vs 52 (12/16’s high was 712!!!) The 2014 range is 24-1043!!! S&P VIX closed sharply lower but STILL well into bear territory at 17.01 -2.30, two days after hitting 22.90. Could still make another run at 12/16’s high of 25.20, which was highest since 10/17! Problem now is options expiration NEXT Friday! We remain at risk of those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The average of the past 12 months is 14.24 slowly and steadily climbing, with a low of 10.28!…high close was 26.25 on 10/15/14!
U.S. Bond market closed weaker for a second day following SEVEN straight rally days that took out the 12-month low yields (10’s 1.94%; 30’s 2.50% and long TIP 0.66%!!!). Closes: 10’s 2.02% -7/16; 30’s 2.60% -1-9/16; long TIP 0.73% -1-5/16.
Libor: 0.254% 3 mos.; 0.362% 6 mos., a tad better – still not that far off their recent record lows! The Fed Funds rate has averaged 0.09% and is now 0.12-0.13% – 0.14% remains the 9-month high. T-Bills: +0.01%, one-month; 0.03%, 3 mos; 0.25% – back at the recent high!
Gold stayed in a narrow range with a low of $1204.20 and closed at $1208.50 -$2.20 two days after printing $1223.70 following a positive key reversal…with the close highest since 10/29 and also the first time since then without a print below $1200! It is no longer weak, making $1200 major psychological SUPPORT again, as well as the 40/50 day! $1238 is next resistance. Until Wednesday, every session since 12/23 had a range between $13 and $21, with the bias now to the upside! 11/7’s low was $1130.40, the current 12-month low! 42 of the last 46 sessions with prints below $1200. Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! MAJOR SUP now at the 40 day $1196, and the 50 day $1192, with major res at the 200 day $1257 – all stable. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. 11/7’s low was $1130.40! Silver too held above $16 with a session high of $16.58 – creating a double top and highest since 12/16, that following its $17.27 high on 12/9. $14.12 is the recent low, not seen in more than five years!
Crude, for the first time in eight sessions did NOT hit a new low following Wednesday’s $46.83 print, still lowest since 4/30/09. It closed at $48.79 +.16 in a boring session. 10 days ago the high was $58.91 Consider: 10/25’s high was $84.83. There have been 61!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13, and if off 55% since then! The record high of $147.27 was on 9/30/08, the low since on 4/30/09 is $51.94. Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($63.11!!!), then the 50 day ($66.37!!!), and lastly the 200 day ($90.25) – 50 day still in freefall. The recent range is now $46.83-$112.24 since 3/1/12. Note that following the financial crisis it traded down to $32.40 on 12/31/08 from a high of $147.27 just three months earlier (-78%!!!). TB’s bet? $42…don’t ask why…
Note: TB’s new wine blog is now posted at traderbillonwine.com
Have a great weekend…stay warm, my friends…and thirty for Sunday’s playoffs!