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Friday, January 5, 2018

Market Alert - Pre-Market

Futures vs FV: SP +7.31 +663; NASDAQ +31.92

The jobs report perhaps is casting a bit of a pall on the market. Futures were nicely higher ahead of the number, rallied after, but are now rethinking and are lower than before the report hit the wire. Bad news not necessarily good news? Perhaps. The market of course wants it all: a compliant Fed and strong growth. The jobs report perhaps helped ensure a bit of the former but raised questions about the latter.

Non-farm payrolls: 148K vs 180K exp vs 228K November. 204K/month in Q4

Unemployment rate: 4.1% vs 4.0 exp vs 4.1 Nov

Earnings: 0.3% as expected vs 0.2% prior. 2.5% year/year

Workweek: 34.5 as expected vs 34.5 prior

2017: 2.1M jobs created

Healthcare: 31K
Construction: 30K
Manufacturing: 25K
Food and Drink: 25K
Warehousing: 30K
Retail: -20K (-67K in 2017)

Participation: 62.7% flat for 3 months

U6: 8.1%

Black unemployment rate: 6.8%, -1% year/year, a record low.

Tax reform effect: 85 major companies offering bonuses or extra compensation to workers.

Trade balance: jumps to a 6 month high on the deficit as imports surge. That tells you that the US economy and consumer are going well. We always buy more imports when the economy is working for us.

Sentiment: Yesterday Mr. Tepper stated he feels that stocks are as cheap heading into 2018 as they were heading into 2017. We use Tepper as a sentiment indicator. He made us a lot of money a few years back when he said he was 'nervous' about what was ahead. A lot of stocks were set up to rally and his comments, after several weeks of market declines, occurred on the very day the market bottomed and reversed. This time there are not a lot of stocks set up to roll over at this point, but are extended. So we watch for reversal signs given the continued turn to 'what can go wrong' mentality re the markets, yet at this point it still shows upside indications.

AAPL: Says its iPhones, iPads, Macs are susceptible to the flaws. Will have a fix for Safari in a few days.

Bonds: 2.458% vs 2.456% 10 year

EUR/USD: 1.2046 vs 1.2075. Dollar bounces some.

USD/JPY: 113.20 vs 112.74. Dollar bouncing here as well

Oil: 61.44, -0.57

Gold: 1322.60, +0.08

Futures continue to fade off the morning highs hit just after the jobs report release. Still quite strong, particularly on NASDAQ. Market is up for 3 days and looking at a fourth this morning on a Friday to start a new year. Not our favorite time to buy. We will see if there is some gain to take on the early move upside.

That said, there are stocks that have not made extended moves yet and we are looking at those as possible entries even if it is Friday of a new year that is up 4 straight days.

Jon Johnson, Chief Market Strategist
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