Wall Street Strategies
Hello! Sign in or Register


Morning Commentary

...SIGNIFYING NOTHING

By Charles Payne, CEO & Principal Analyst
1/7/2022 9:31 AM

Flailing Adjective

Definition of flailing

1: moving, swinging, or beating wildly like a flail —used especially of a person or a person's limbs.

2: market-fighting desperately to stop a rout from becoming worse.

The market zipped around all day yesterday, only to finish unchanged. On the one hand, the fact that major indices, especially the NASDAQ Composite climbed off the canvas early was encouraging. The inability to get upside and out of first gear was a constant reminder of near-term challenges. But, on the other hand, the S&P 500 was all about Energy (XLE) and Financials (XLF).

S&P 500 Map

Under the Hood

The grit was admirable, but it actually was uglier under the hood than most recent down sessions. New 52-week lows have rocketed in the last few sessions.

Market Breadth

NYSE

NASDAQ

Advancing

1,848

2,163

Declining

1,506

2,475

52 Week High

64

88

52 Week Low

184

608

Up Volume

2.05B

2.01B

Down Volume

1.60B

2.28B

Calm First?

This week, an intriguing issue is how little the CBOE Volatility Index (VIX) has risen. It’s up but not the kind of spike one would associate with the narrative of fear of a Fed that is ready to ruin everything. So, perhaps there have to be smaller intraday gyrations and a sense of calm before any rebound attempt can get true traction.

VIX

The Russell 2000 finished higher, but there is a lot of work to be done before we can say the worst is over.  It’s still trading below key moving averages, and the Relative Strength Index (RSI) is turning over again.

Chart

Economic Data

The December Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) report dipped to 62, from the record high of 69.1 in November. But, overall, the report was strong - and combined with the manufacturing report on Wednesday, it supports the notion that may be the worst of supply chain inflation is passing. Although you have to see it in the numbers as all comments portray desperation for workers and supplies:

“Labor shortages, transportation delays and supply constraints/allocations.” [Accommodation & Food]

“Business is greater than in the past. Supply chain issues persist, but we’re evolving to overcome or manage them better than in the past.” [Agriculture, Forestry, Fishing & Hunting]

“Construction material shortages and longer lead times continue to hamper operations. Significant cost increases from labor and freight are forecast for the start of next year.” [Construction]

“Seeing inflationary forces in the marketplace, which is resulting in suppliers raising their prices moving into 2022.” [Finance & Insurance]

“Continued inflationary pressures driven by the cost of fuel, shipping capacity constraints, and imbalances in supply and demand are impacting a broad spectrum of products.” [Management of Companies & Support Services]

“Late deliveries and shortages continue. Disruptions seem to be declining somewhat, as suppliers and customers are finding innovative ways to keep supplies moving.” [Public Administration]

“Inflation and supply chain issues have caused cost increases and stockouts, but sales continue to be strong, with a positive outlook for the next quarter and beyond.” [Wholesale Trade]

ISM Services United States ISM Non Manufacturing PMI

Factory Orders

Another strong report, lifting orders up for 18 times in the last 19 months. 

Image

Jobs Report

As I stated on Wednesday, that huge Automatic Data Processing (ADP) employment report beat (800,000 versus 400,000 estimates) has official whispering numbers surging for this morning’s U.S. Bureau of Labor Statistics (BLS) Jobs report. Last night, Goldman Sachs (GS) moved to 500,000 from 444,000, with an unemployment rate of 4.1%.

Omicron will be the hair on this report, but the misses have been so huge that one of these reports has to be a monster beat.

Portfolio Approach

There are no weighting changes this morning in our Hotline Model Portfolio.

TableDescription automatically generated

Jobs Report

As I stated on Wednesday, that huge Automatic Data Processing (ADP) employment report beat (800,000 versus 400,000 estimates) has official whispering numbers surging for this morning’s U.S. Bureau of Labor Statistics (BLS) Jobs report. Last night, Goldman Sachs (GS) moved to 500,000 from 444,000, with an unemployment rate of 4.1%.

Omicron will be the hair on this report, but the misses have been so huge that one of these reports has to be a monster beat.

Today’s Session

The December jobs report was another bust coming in at 199,000 when the street was looking for 422,000 but whisper numbers were 500,000+.  There is a lot of hand wringing this morning as the experts try to explain why they keep getting it so wrong.  

I do find it interesting that stocks are under some pressure considering this number does not speak to a job market that's on fire. Some are pointing to the unemployment rate, but that is a specious number and Powell has already stated there are other metrics employed.

One reason for that is the bifurcation in different groups, and of course, the fact the number tends to move lower when people leave the labor force - not a sign of strength. 

In December, Hispanic unemployment rate moved to 4.9% from 5.2%, but 96,000 left the labor force. Conversely, Black unemployment rate climbs to 7.1% from 6.5%, as 29,000 entered the labor force.  In both cases, there were fewer employed, minus 5,000 and 86,000, respectively. 

US Jobs Report

United States Non Farm Payrolls

Wages increased 4.7%, and the prior month was revised higher to 5.1%. These are solid number, but lets not forget inflation in the last read was up 6.8%.


 

Log In To Add Your Comment


Home | Products & Services | Education | In The Media | Help | About Us |
Disclaimer | Privacy Policy | Terms of Use |
All Rights Reserved.