Dave Moenning

Does The Jobs Report Change Anything?

The first Friday of a new month means one thing: The Jobs report. Viewed by many as the most important economic report of the month, the data on nonfarm payrolls and unemployment for August surprised to the downside.

The Labor Department reported that the economy created 156,000 new jobs last month, which was below the Reuters consensus for 180,000.

The unemployment rate, which had been expected to hold steady at 4.3%, instead rose a tenth of a percent to 4.4%.

The next important stat in this report is wage growth. The report indicated that workers’ pay increased by 0.1%, which also missed expectations by a tenth. Over the past year, wage growth has increased at a rate of 2.5%, which is a solid number.

The report showed that the nation’s private sector gained 165,000 jobs in August. This was below both the consensus estimates and the ADP report, which sported job growth of 237,000 last month.

As usual, there were revisions to the prior two months’ job growth. July’s total was cut by 20,000 from 209,000 from 189,000 while June was revised to 210,000 from 231,000. This means the current three-month average for job growth stands at 185,000.

It is important to note that August payroll numbers have tended to be volatile due to seasonal distortions. CNBC reports that August numbers often come in weak at the first reading only to be revised higher down the road. For example, in 2011, the initial reading for job growth came in at zero, but was later revised to 104,000. In 2016, the first report showed 151,000, while the final number was 176,000. Thus, we probably shouldn’t get too worked up about the so-called “misses” in today’s report.

Analysts have been watching the economic data more closely of late due to the belief that the economy could be accelerating. This week’s GDP report, which showed the economy growing at a rate of 3% versus the consensus for a rate of 2.7% is Exhibit A here.

From my seat, today’s jobs report doesn’t negatively impact this theme. Nor does the report change the view of what Janet Yellen’s bunch is expected to do next (i.e. begin reducing the Fed’s balance sheet at this month’s meeting and then continue returning rates toward “normal” levels later in the year). And it is for this reason that stock futures are little changed after the report and pointing to a higher open on Wall Street.

I will also opine that the view the economy is “doing just fine, thank you,” is also behind the stock market’s recent rebound. But with the major indices having moved largely sideways since summer began and the top end of the range fast approaching, it will be interesting to see if the bulls have enough firepower to break out to new highs.

Enjoy the Labor Day weekend!

Thought For The Day:

It is the mark of an educated mind to be able to entertain a thought without accepting it. -Aristotle

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the Tax Reform

      2. The State of the Economic/Earnings Growth (Fast enough to justify valuations?)

      3. The State of Geopolitics

      4. The State of Fed Policy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

Quick Take: Job Market Continues to Improve, Bulls Have Work to Do

The first Friday of a new month means that jobs are in focus – so let’s get right to the numbers. The Labor Department reported the economy created 209,000 new jobs in the month of July, which was well above the Reuters consensus expectation for 183,000 new jobs. In addition, the nation’s unemployment rate fell to 4.3%, which tied the lowest level seen since March 2001.

Digging into the details, we find that average hourly earnings climbed 0.3% to $26.36 an hour, which is up 2.5% over the last year and unchanged from the prior month. For reference purposes, MarketWatch reports that wages usually rise 3% to 4% a year when the economy was is running at full throttle. Remember, average hourly earnings is a stat the FOMC is watching very carefully.

The number of employed Americans hit a fresh new high at 153.5 million while the U6 Unemployment Rate (the all encompassing or “real” unemployment rate) was unchanged at 62.9%

As usual, there were revisions to the job gains for the last two months. June’s 222,000 gain was revised up to 231,000 while May was cut from 152,000 to 145,000.

Private sector job gains were 205,000 in July, which was well ahead of the totals seen from the ADP report earlier in the week.

For calendar year 2017, the economy is creating an average of 195,000 jobs per month.

Stock futures and bond yields have both moved higher on the news, with the Dow futures pointing to what could be another all-time high at the open. However, it is important to recognize that the rest of the major stock market indices are not following the Dow’s lead at this point in time and that the Transports are actually in a downtrend. As such, the bulls have some work to do before an all-clear/onward and upward signal can be given.

Publishing Note: My wife and I are closing on and moving into our new home next week. As such, I will publish reports only if time and energy level permits.

Thought For The Day:

Security is not the meaning of my life. Great opportunities are worth the risk. -Shirley Hufstedle

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of the U.S. Economic Growth (Fast enough to justify valuations?)

      2. The State of Earnings Growth

      3. The State of Trump Administration Policies

      4. The State of Fed Policy

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

Quick Take: Jobs Disappoint, Bulls Need To Hold The Line

Stocks broke to fresh all-time highs yesterday as the bears were once again unable to get anything going with the overbought condition and concerns over politics in Washington. The onus is now on the bulls to make the move stick and to avoid the dreaded “breakout fake out.”

Until just a few minutes ago, it looked like the bulls were going to continue to run on this fine Friday morning. But then the Big Kahuna of economic data – the Jobs Report – for May was released. In short, the report ran counter to the upbeat data on private sector payrolls from ADP and came in on the disappointing side.

The Labor Department reported that the U.S. economy created 138,000 new jobs during the month of May, which was well below the expectations for 184,000. In addition, the last two months’ new jobs totals were revised lower. April’s job creation was cut by 37,000 to 174K while March’s already weak numbers were reduced further to 50K from 79K. This means that the economy created 66K fewer jobs over the last three months than originally reported.

The good news in the report was that the nation’s Unemployment Rate fell to 4.3% last month. This was a tenth lower than the expectations for an unchanged reading and the lowest level of unemployment since late 2001. However, analysts note that the decline in the unemployment rate can be attributed more to people leaving the labor force than an increase in the number of people finding new jobs.

On that score, we note that the Labor Force Participation Rate fell 0.2% in May to 62.7%, which is one of the lowest levels seen since the late 1970’s.

One analyst noted that the decline in the unemployment rate occurred due to the developing tightness in the labor market, which makes it harder for companies to fill positions.

Next, Average Hourly Earnings rose by 0.2% last month, which was unchanged from April and below expectations. On a year-over-year basis, wages have increased 2.5%.

In response, stock market futures have given up the majority of their early gains and the yield on the 10-year is currently trading at the lows for the year.

So, from a stock market perspective, it would appear that it is once again “game on” regarding the status of the all-important “breakout” to the upside. In short, if the bulls can hold the line at S&P 2418 they will maintain the upper hand going into next week. However, a dip below this line in the sand will suggest a return to the sideways trading range. Stay tuned.

Thought For The Day:

Try smiling early and often today…

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Trump Administration Policies

      2. The State of the U.S. Economy

      3. The State of Earning Season

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

Looking for a “Modern” approach to Asset Allocation and Portfolio Design?

Looking for More on the State of the Markets?


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.

Dave Moenning

Friday Quick Take: Jobs, France, Buffett and Oil

There are several items in focus this morning including Warren Buffett’s big meeting (as well as his take on both IBM and Apple), the election in France on Sunday (Macron continues to hold a 20-point lead – but strange things have been happening at voting booths around the world lately), the latest move in oil (don’t look now, but oil was trading below $44 this morning based on supply concerns – and remains something to watch), and of course, the Big Kahuna of economic data – the Jobs Report.

The latter is attracting most of the attention at the moment as job creation in April rebounded from the surprisingly weak March reading. According to the Labor Department, the U.S. economy created 211,000 jobs last month, which was above the consensus expectation for 185,000.

Next, the nation’s official Unemployment Rate fell to 4.4%, which was down from March’s reading of 4.5% and two-tenths below analysts expectations of 4.6%. It is worth noting that the current level is the lowest seen since May 2007.

However, there are numerous ways to look at the rate of the unemployed. For example, there is the now-popular U-6 rate, which includes those not actively looking for jobs and folks looking for part-time work. The U-6 dropped to 8.6% in April, which is down from the 8.9% level in March, and the best reading since November 2007.

Another way to view unemployment is to take the number of employed people relative to the population. This ratio rose to 60.2% in April, which is the highest level seen since February 2009.

As usual, there were revisions to the prior two months’ job creation totals. March was revised down to 79K from 98K while February’s numbers went up to 232K from 219K.

On the income front, Average Hourly Earnings rose by 0.3% in April to $26.19 per hour and hourly wages grew by 2.5% on a year-over-year basis.

The Takeaway

What jumps out at me in this report is the “best reading since” numbers. For example, the Unemployment Rate is the best since May 2007. The U-6 is the best since November 2007. And the ratio of employed-to-population is the highest since February 2009.

Thus, it is fairly easy to argue that the jobs market has returned to levels seen before the Great Recession. And as such, the Fed is justified in returning rates to more normalized levels.

In addition, it would appear that the Fed’s view that the weakness seen in Q1 may indeed have been “transitory” as hiring clearly perked up again after March’s hiccup. And from a big-picture standpoint, I believe the idea of the economy rebounding from the usual late-winter swoon is critical to the current market levels and trader narrative. Therefore, we need to continue to watch the incoming data in May/June for signs of confirmation.

Thought For The Day:

Remember that it pays to be open minded (in more ways than one)…

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Trump Administration Policies

      2. The State of the U.S. Economy

      3. The State of Earning Season

      4. The State of World Politics

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

Looking for a “Modern” approach to Asset Allocation and Portfolio Design?

Looking for More on the State of the Markets?


Disclosures

The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

David D. Moenning is an investment adviser representative of Sowell Management Services, a registered investment advisor. For a complete description of investment risks, fees and services, review the firm brochure (ADV Part 2) which is available by contacting Sowell. Sowell is not registered as a broker-dealer.

Employees and affiliates of Sowell may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Positions may change at any time.

Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Advisory services are offered through Sowell Management Services.