Friday, June 4, 2010

Disappointing Jobs Data Destroys Stocks

While one hates to gloat over predictable bad news, that's the condition in which I find myself at the close of the Friday session.

Not only have I been lambasting politicians and stock jockeys for months that the "recovery" was nothing more than an illusion created by lazy media and a crooked, manipulated, insider-trading Wall Street machine, but I also pointed out yesterday - and the month before, and for many months before that - that the ADP private sector employment numbers were more realistic than those released by the government.

When the BLS put out its monthly non farm payroll report at 8:30 am, it was as though somebody had shot a cannonball through the front of the NY Stock exchange building. Traders went scurrying for cover as quickly as they could, primarily because what they were led to believe was going to be a positive report, showing robust job creation in America during the month of May, turned out to be such a big-time stinker that all bets on economic recovery were put onto back burners or otherwise discarded.

The government showed a gain of 431,000 jobs for the month of May, but 411,000 of those were temporary hires related to completing the 2010 census, and even those jobs fell under considerable scrutiny later in the day as analysts began scouring around for a supposed army of nearly 1/2 million census workers. These workers were ostensibly hired to piece together missing data in the simple census form which was mailed to millions of homes back in February and March.

Simple math alone tells us that these 411,000 "workers" would have to individually count a total of about 750 people each to get around to the number of people in America, a job that should take maybe a week. We're told that many of these temporary census workers will be on the job until sometime in the fall, meaning that, like most government work, they'll just have to do little more than show up in order to get paid. Maybe I'm old-fashioned, but hiring 400,000 people for three months to do head-counting seems a little extreme, especially given that most (something on the order of 60%) Americans sent their census forms in through the mail, as required.

Besides the absurdity of the census, misleading statements by both the president and vice president earlier this week, and by once-again discredited Goldman Sachs' analyst Jan Hatzius, who predicted on Thursday that the May figure would come in at 600,000, there are some questions of impropriety which likely will never be addressed, including why the two top officials in this administration and an analyst working for a Wall Street firm under investigation for fraud, would so willingly lead people to believe that the jobs figure would be a solid one?

Not to jump on the conspiracy bandwagon wearing a tin-foil hat, but after government has shown an unseemly willingness to do whatever the lords of Wall Street seem to want, the old qui bono? (who benefits?) must be on the mind of more Americans than just little old me.

Whatever the case, the horrible jobs report, even though it was the most jobs created in one month since March 2003, was so pathetically bad that investors, traders and fund managers got very busy, dumping stocks all day long.

Dow 9,931.97, -323.31 (3.15%)
NASDAQ 2,219.17, -83.86 (3.64%)
S&P 500 1,064.88, -37.95 (3.44%)
NYSE Composite 6,600.28, -260.11 (3.79%)

Declining issues swallowed up advancers in a sea of red, 5786-796, or a better than 6:1 ratio, and new lows took back the advantage from new highs, 173-93. Volume was elevated to levels not seen in over a week, but nothing extreme, leading one to believe that a lot of smart sellers were already out of the way before the jobs data was released.

NYSE Volume 7,241,763,000
NASDAQ Volume 2,338,401,500

Oil was slammed, losing $3.10, to $71.51. Gold gained $7.90, to $1,216.20, but silver a a major loser, down 63 cents (3 1/2%) to $17.29.

Damage inflicted on holders of equities was severe. The Dow suffered its fifth weekly loss in the last six, and finished at its lowest point since February 8, 2010, though markets now appear poised to take out even lower levels. With so many investors sucked into the recovery mantra, economic data over the next four to five weeks will be crucial, leading up to an even more critical 2nd quarter earnings season.

More troubling news came from Europe, with Hungary now suggesting it is close to sovereign default, putting more pressure on the Euro, which fell below 1.20 to the dollar, a level not seen since 2006. The global debt crisis still not anywhere near resolution, expectations from honest economists are for significant slowing of global growth, especially among developed nations.

Rosy projections for 3.5 to 4% growth in US GDP for the year are being reassessed due to evidence that the recovery - if one eve exists at all - will be sluggish at best.

Holders of gold, cash and tools of trades should pat themselves on their collective backs on days like today, but not too vigorously, as more of them are likely to occur during the next 18 to 36 months.

Sorry to sound so negative on a lovely Friday afternoon, but facts are facts, and the US government has dug us a hole of debt so deep as to undermine the very existence of what would be considered a normal, functioning economy. Other developed nations, particularly those in the Euro-zone, have done similar harm to their own economies, We continue to wade through the throes of an enormously deflationary event, caused by 25 years of profligate spending by governments, businesses and households alike.

Two types of belts are encouraged. One for tightening, and another, of your favorite pain-relieving decoction.

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