Expectations were running high for another strong showing in the latest U.S. employment data, and the U.S. Department of Labor did not disappoint. Nonfarm payrolls rose by 257,000 jobs in the U.S. in January, beating analysts' forecast for a 230,000 increase. The unemployment rate ticked up to 5.7 percent, from 5.6 percent in December, but any concern was more than offset by the upward revisions in the number of jobs created in November and December. While there is no question that the overall jobs situation in the U.S. is continuing to improve, investors have shifted focus, however. With the question now when, rather than if, the Federal Open Market Committee will begin tightening, the quality rather than the pace of job creation is taking precedence in market sentiment. Hourly earnings, which are expected to rebound by 0.3 percent after a surprise decline in December, are likely to take the analyst spotlight. In December the participation rate contracted to 62.7 percent, keeping the level near record lows and supporting concerns that job recovery remains fragile. With U.S. financial assets continuing to set the pace for global markets battered by macroeconomic concerns, today’s data will reverberate well beyond Treasury markets.
Greek pols announce commitment antiausterity campaign promises. After a whirlwind tour of European capitals, newly installed Greek Prime Minister Alexis Tsipras and Finance minister Yanis Varoufakis are back in Athens and have vowed publicly to stick to pledges to end austerity measures, regardless of any dissent from within European Union ranks. In response, the next Eurogroup meeting has been pushed ahead to February 11. Most analysts anticipate that the meeting will result in a confirmation of the hardline policy favored by German leaders, as the EU seeks to avoid setting a precedent for other members still recovering from recession.
Fed predicts uptick in consumer credit numbers. Federal Reserve consumer credit estimates for December are forecast to rise by $15.2 billion with nonrevolving debt — consisting mainly of automotive and student loans — expected to lead the charge once again. In November revolving credit, most of which is credit card debt, contracted for the second consecutive month.
German factory activity shows slight slump. Industrial production data for Germany in December registered slightly weaker than expected, at 0.1 percent month-over-month. Despite coming in softer than consensus estimates, a revision to November data has created four consecutive positive readings for the measure for the first time since 2011.
U.K. trade deficit widens more than expected. U.K. trade data released today revealed a total annual deficit for 2014 of £34 billion ($52.1 billion), a four-year high, as exports disappointed in December.
Portfolio Perspective: The Bullish Signals Overlooked in the Stock Market — Nicholas Ragone, Villicus Capital Group
To say the stock market has been volatile the past two months is a huge understatement. The bears are screaming that a steep correction is imminent, considering the bull market is nearly six years old — the fourth longest in history. Regardless of the uncertainties stemming from free-falling oil prices, the Federal Reserve ending quantitative easing, the Greek crisis and so on, the only thing that ever matters is price.
The S&P 500 has been a source of concern since October after a short-lived visit below the 200-day moving average. While everyone hyperfocuses on oil prices and negative news, the midcap S&P 400 index soared to a new zenith Thursday. The S&P 500, Nasdaq and small caps are just a few points from scoring new highs. This doesn’t happen in weak markets. Sentiment indicators show investors are a far cry from the exuberance typically seen at market tops.
Nicholas Ragone is a managing member and portfolio manager at Villicus Capital Group, an alternative investment management firm in Melville, New York.
