Morning Commentary
This week’s jobs report is shaping up to be more important than usual. Last Friday saw economic growth come in slower than anticipated as wages are increasing at its slowest pace ever on record. Then, there was yesterday’s report on personal income and consumer spending. The former is up 0.4%, while the latter has increased by only 0.2%. Weaker paychecks have naturally played a part in less consumer spending. However, savings in the first quarter is up 5.2%, the highest in years, which reflects something more than punk pay increases.
There’s an anxiety normally associated with the start of a recovery, not the top where there is often unbridled confidence.
Business investment is abysmal; consumers are largely on strike, save for going out to dinner, and it’s resulted in a market losing its footing.
Interestingly, even as crude oil continues to decline and presumably gasoline prices as well, consumers are not spending. Yesterday’s selling in the oil patch caused an accumulation of pressure to break the dam, but it was timely as China’s manufacturing woes triggered the latest round of selling.
Crude oil is back to the March lows and it will have to make a stand.
However, there’s no doubt that China’s demand for all commodities has made the difference for years; the question is, has it all evaporated and is there any other demand picking up the slack? For the moment, the bias is strongly to the downside as selling begets selling.
The Market
The market reversed off the low of the session in the afternoon, but all the major equity indices finished lower for the day, while the Dow Jones Industrial Average (DJIA) continues to make a series of lower highs and lows. Of course, those Blue Chip oil stocks have become like anvils for the index.
The Dow moving through 17,800 could signal a big rally into the more treacherous fall months, but more importantly, it is holding above yesterday’s lows.
Today’s Session
Today's session will begin with the same nervous calm that's paced many sessions of late. We aren't going to force the issue. With the jobs report on Friday, there's extra anxiety than normal and emotions are skewed to the downside.
There are questions that need to be answered from commodities free-fall to corporate earnings. Parsing those numbers has been difficult because of the strong dollar truly makes things complicated. Take Harman which posted a blowout quarter, beating the street on top and bottom line, but the true extent of its business was not reflected.
Financial results begin with income statement and that top line...revenues. Harman revenue were up 16% officially, but if measured at last year's currency exchange rates revenue would have been up 28%. This is a giant difference and must be considered for long term investor more interested in business trends rather than knee-jerk trading.
(PS our team will be listening to the HAR call and will have an update later.)
One thing I'm not going to do is force the issue. The market is oversold in some areas, but we aren't going to try to pick the exact bottom. That said I'm not going to be the last one on when the trend reverses and leaves the station.
Comments |
Too much computer algorithm trading. Need more common sense humans involved. Duke Gossage on 8/4/2015 10:10:20 AM |
You do GREAT work and I wish you still on Fox/B in the AM. Guy Wilson on 8/4/2015 10:21:02 AM |
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