January Effect In Force; US Adds 160,000 Jobs In December

Stocks rallied once again, with the Dow jones Industrials popping for a gain of over 200 points. The Dow closed higher for the fourth time in six 2020 sessions for a total rise of 418 points, or about 1.4%.

The Dow, S&P 500, and NASDAQ set new all-time highs on a closing basis, while the NYSE Composite index finished just shy of a record, ending the session at 13,997.65. The prior high of 14,001.13 was achieved on January 2. Any kind of positive return Friday should push the Composite into record territory.

Investors should get their "Dow 30,000" hats ready, because the world's most-watched stock index is about to surge beyond that number, quite possibly today right at the open after the Bureau of Labor Statistics (BLS) reported an additional 145,000 jobs created in December according to the just-released non-fram payroll report for December, 2019.

Even though there's some seasonality to the figures due to holiday hires and a fall-off after November's gains were boosted by striking GM workers returning to their jobs, the number is another sign of strength in the underlying US economy, now, more than ever, the main driver of global growth. As Europe struggles with deflationary trends, negative interest rates, and high unemployment (especially among youths), and China increasingly seems to be bowing to pressure on tariffs and trade from the US, America's clout has become paramount.

Among developed nations, the United States continues to set the agenda, as President Trump's "America First" strategy has emboldened employers and workers alike to share in the positivism of the current environment. While wage growth is still sluggish, job creation in the private sector continues strong. Wednesday's ADP private payroll report found 202,000 new jobs created in December.

While the 145,000 jobs in the non-farm payroll report did come in below estimates of 160,000, the miss was not significant. October was revised 4,000 lower, to 152,000, and payrolls in November were revised down 10,000 to 256,000.

Unemployment remained steady at 3.5%, as expected. By sector, retail and leisure/hospitality led the gains, with bricks and mortar stores adding 41,000 jobs while restaurants, hotels and such added 40,000. Health care was another gainer, picking up 28,000 jobs in December. Construction trades added 20,000 new positions, but manufacturing and transportation declined, by 12,000 and 10,000, respectively. For all of 2019, manufacturing added 46,000, while transportation gained 57,000.

Those two sectors are offering indications that the expansion may have run its course, or at least is slowing significantly. In 2018, manufacturing added 264,000 jobs, transportation gained 216,000. While those figures may cause some anxiety, they also can be interpreted as a sign that these segments of the economy are still integrating the additional employees and that this period is merely a lull, following a robust hiring round.

Overall, despite the small miss and reductions from prior months, the report still comes in as positive for the US economy. Perhaps not the robust growth expected by the most bullish, but stable hiring is a sign that, in such a mature economy, nothing troubling lies directly ahead.

The jobs report was good enough to keep the rally humming along. The major indices should continue their path through record highs for time being.

At the Close, Thursday, January 9, 2020:
Dow Jones Industrial Average: 28,956.90, +211.81 (+0.74%)
NASDAQ: 9,203.43, +74.18 (+0.81%)
S&P 500: 3,274.70, +21.65 (+0.67%)
NYSE Composite: 13,997.65, +63.21 (+0.45%)

US Equites In Danger Zone After Very Volatile Week

The US economy isn't exactly on its back, but it also isn't growing by the phony 3+ percent the government reported in the past two quarters.

Speaking strictly from an economist's perspective, the US government GDP figures include grossly-inflated government spending and just about every spare dollar their statisticians can unearth from the mainland, Alaska and Hawaii.

GDP-watching is a Wall Street phenomena, serving the interests of the corporatists who need to return dividends or share growth to stockholders. Thus, it adds impetus to the argument that investing in US corporations is a good idea. That may or may not be true, depending largely upon which corporation is attracting the investing dollars.

Obviously, the FAANGs (Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (Alphabet, GOOG) have been the most attractive of the past six to eight years, while quite a few have faltered. Most of the stocks making gains since the GFC of 2007-09 have been the result of massive stock buybacks, a dubious distinction, as these high-fliers are the ones most prone to collapse in the case of a market rout.

They've diluted their shares and have deployed capital in one of the worst ways, buying back shares in order to boost EPS (earnings per share). Having fewer shares available while keeping profits at roughly the same level improves EPS, but it does not expand the business potential. Banks and financials are especially guilty in this regard. They're over-leveraged and will pay a price, but their executives and shareholders are happy little clams, for now.

When the share price falls, and dividends are slashed, the shareholders will be singing a different tune. The executives will be long gone because they've proven to care only about their own pockets and bonuses.

In any case, stocks ran through a very volatile week, punctuated by a massive dead-cat-bounce rally on Thursday which stanched some of the losses incurred since all-time highs the previous Tuesday.

There could be a waterfall effect developing, because confidence is waning. The holiday shopping season - which is demonstrably longer than last year's - should provide a boost, but the economy is lurching closer to two important events: the December Fed meeting and the expected rate hike, and another round of negotiations in congress over the debt ceiling limit, both mid-month.

Elsewhere, oil remains at elevated levels, above $55/barrel for WTI crude, gold and silver were bounced around but appear ready for a breakout (as they have too many times in the past four years, with nothing to show), bonds were flatter still.

At the Close, Friday, November 17, 2017:
Dow: 23,358.24, -100.12 (-0.43%)
NASDAQ 6,782.79, -10.50 (-0.15%)
S&P 500: 2,578.85, -6.79 (-0.26%)
NYSE Composite: 12,302.89, -0.39 (0.00%)

For the Week:
Dow: -63.97 (-0.27%)
NASDAQ: +31.85 (+0.47%)
S&P 500: -3.45 (-0.13%)
NYSE Composite: -19.71 (-0.16%)

Markets Finish Week On Positive Note

Stocks shrugged off Thursday's minor descent with a ho-hum advance in Friday's session, the Dow ending the week at record highs and its fifth straight week of gains.

After PPI and CPI data showed inflation on the rise, market participants were content to trade upwards, as inflation expectations are supposedly a key to the Fed keeping their promise to raise interest rates again this year, purportedly by 25 basis points in December.

The Fed has been desperately seeking consumer inflation, targeting two percent, but prices have remained stubbornly low according to the widely-used government data.

So long as inflation continues to rise and unemployment remains at historically-low levels, the Fed sees a path to higher interest rates and a cushion against any economic headwinds.

Of course, the Fed needs to continue their narrative for normalization of interest rates, which have been one percent or lower for almost all of the 21st century and have been in that range continuously since the crash of 2008.

All of the major indices ended the week with gains, albeit small ones of less than 1/2 percent.

The level of complacency in the financial community is mind-boggling.

At the Close, Friday, October 13, 2017:
Dow: 22,871.72, +30.71 (+0.13%)
NASDAQ: 6,605.80, +14.29 (+0.22%)
S&P 500: 2,553.17, +2.24 (+0.09%)
NYSE Composite: 12,352.00, +13.26 (+0.11%)

For the week:
Dow: +98.05 (+0.43%)
NASDAQ: +15.62 (+0.24%)
S&P 500: +3.84 (+0.15%)
NYSE Composite: +34.31 (+0.28)