Futures vs FV: SP +1.30; DJ +15.12; NASDAQ +9.84
Futures started higher on some better global economic news, but after that higher open they have steadily eroded the gains. Some of the beaten up sectors such as industrial metals are up on some better manufacturing data, but they too are fading toward the open.
China: PMI hits its highest level in 2 years
UK: Manufacturing PMI jumps to a record high at 53.3. Apparently Post-Brexit crash prognostications were the usual dime a dozen crap theories.
Speaking of crap, AAPL's Tim Cook calls the EU tax ruling "total political crap." I like Cook better already.
Q2 Productivity, Final: -0.6% vs -0.6% exp vs -0.5% prior
This is the largest drop since 1993.
Three quarters of the largest drops since 1993 back to back to back
Unit Labor Costs: 4.3% vs 2.1% expected vs 2.0% prior.
Why the surge? Do you have to ask? The 'not so affordable' Care Act has surged the costs of employees even as their productivity falls. Paying more for less. As I wrote a couple of weeks ago, this trend cannot stand or else employers will seek alternatives, e.g. automation.
Earnings:
CRM: beat but 'saw softness' and 'weakness' it also guided lower ahead.
BOX: beat
Guidance warnings: FIVE, CRM
Challenger Gray Proposed Layoffs: -21.8% versus -57.1% prior. No planned layoffs so productivity not impacting employers' decision on firing yet. Also, as I discussed with a group of high school students Tuesday, just who out there is left to fire with over 94M working aged people not working? If we lay off anymore, who will do the work that generates the taxes to pay people not to work? They chewed on that for awhile as we also discussed the lack of investment in the US, the decline of the standard of living, the fall of the middle class, the rise of the majority of the non-taxpayers. You know what they said? 'We don't learn any of this in school.' They were shocked and all wanted to know where I go to get the real news. That is what we have to do with this generation raised on federal government education: pull the scales from their eyes and wake them up.
OTHER MARKETS
Bonds: 1.606% versus 1.57% 10 year.
EUR/USD: 1.1138 vs 1.1154. Dollar stronger again
USD/JPY: 103.87 vs 103.482. Dollar stronger again here as well
Oil: 44.39, -0.31
Gold: 1312.10, +0.70
Futures continue their fade from some pretty good morning highs. It would seem the looming jobs report is still enough of a concern to quell any upside enthusiasm. Again, I hate having to deal with an overly active and indeed oppressive central bank. Markets are great; market controllers are not.
Looks as if the mushy pre-jobs action will continue, but there are some good patterns out there, some good pullbacks, and we will see if any new money comes in ahead of the jobs report. Maybe some covering as well as stocks have faded ahead of the report. The last report saw a market fade ahead of the news then a jump afterward. If we see some good opportunity, we will look at positions to take advantage of that possibility.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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