Posted July 3rd 2008
Hostage
This week has been another down week. This morning we had the June employment number released where we lost 62,000 jobs. Weekly unemployment claims rose sharply by 16,000. The weekly number has been very volatile, from a low of 5,000 last week to 16,000 this week. That is why watching the four week average is important because it smoothes out the volatility.
All and all the job market is weak. It is not collapsing, but it is in a prolonged weakened state. The reasons are obvious: we have had to face a housing slump, a financial crisis and an auto industry suffering from high oil prices.
It is not all doom and gloom- there are bright spots. Our exports are still very strong, the farm industry is booming, and anything to do with alternative energy sources is having a bull market. Growth worldwide, while slowing, is still strong and not in danger of falling into a recession.
Again, it is oil prices that are holding us all hostage at this point. It is far too high and unsustainable in light of the falling short term demand. Something is going to happen to cause oil to fall.
It is knowing when and how far it will fall that is impossible.
Good Trading
Steve Peasley
Posted July 2nd 2008
Jobs Decline Again
The number of private sector jobs fell by 79,000 in the month of June, according to a report from Automatic Data Processing. The biggest loss came from goods producing businesses (76,000 jobs) and about a 3000 loss from services. Economists had expected a decline of 20,000 jobs. This loss has resulted from the slowdown in factory orders which have had its weakest performance in three months. Much of the slump is due to the decreased demand for autos, heavy machinery and steel. Factory orders had risen by .6 percent in May, less than half the gains turned in during April and March. Even with the negative news, the market opened to the upside, however it has recently slid off into negative territory. The Non-Farm Payroll report comes out tomorrow which is extremely important data which the market will react to. The market expects a decrease of 60,000 jobs. In May there was a reduction of 49,000 jobs, so watch for this critical number tomorrow.
Good Trading
Steve Peasley
Posted June 30th 2008
A Tug on the Markets
The market has enjoyed a modest bounce this morning from a brutal beating last week. Oil is flat this morning but still near all time highs which seem to be continually fueled by a fed funds rate at 2% which continues to weaken the dollar and erode the buying power of all Americans. Iran and Israel political tension is not helping the cause, but lower demand by U.S. drivers is beginning to weigh on the price of crude. Look for demand overseas to also weaken as our economy drags others with us. So for now there seems to be more of a tug of war between demand erosion due to higher prices and a weaker dollar.
The market would love for oil to break as it would reduce one of the many strains on the global economy. Look for governments world wide to fight these higher prices tooth and nail to help their citizens cope. Much lower oil prices (i.e. $90-100 per barrel) would at least spark a short term rally in the market, but the questions about the financial crisis would still weigh on the prospects of much higher stock prices. Continue to avoid financials and look for better values in less troubled areas. The market can be pretty hairy at times, but diligence will prove very profitable in time.
Good Trading
Steve Peasley
