The economy created 103,000 jobs in December according to Bloomberg.com, far fewer that the consensus expectation of 150,000, and a major disappointment relative to raised expectations in the wake of the strong ADP report that we highlighted for our readers earlier in the week. Stocks still managed to open marginally higher this morning despite the disappointing jobs news. The markets will also be following Fed Chairman Bernake’s appearance before the Senate Budget Committee this morning. The major averages finished mixed Thursday as strength in the Technology sector powered the NASDAQ higher while the Dow and S&P 500 ended slightly lower. European stocks are lower this morning ahead of next week’s bond issues. Asian markets were mostly lower, although the Nikkei managed a slight gain.
There were three items that we were discussing in the office this morning that we thought would be of particular interest to our readers:
A busy week is in store for economic events here and abroad next week. The release of the Fed’s Beige Book, a qualitative assessment of the economy in each of the 12 regional Federal Reserve districts, comes out next week, as does the December retail sales report. Also due out are data on the export sector, consumer and producer price inflation and mortgage applications. Overseas, China will release its full slate of December data next week. Central banks in Europe, the U.K., Thailand and South Korea all meet to set interest rates. Of those central banks, only Thailand is expected to raise rates.
The job picture remains supportive of a continuation of QE2. Fed Chairman Bernake has stated that it may actually take four to five years for the labor market to normalize. He also stated that even as economic growth picks up, the unemployment rate will remain high. On balance, today’s job report reinforces the Fed’s case to continue to pursue QE2.
The raising of the debt ceiling by Congress will be watched by the markets and will be in the “national conversation” daily. Normally, the raising of the limit on the debt ceiling is a non-event for markets, but because the deficit is in the news (here and abroad), the debate on this issue may unnerve some foreign investors who hold 50% of Treasuries.
As always, email me here with your questions or comments. I love to hear from you and thoroughly enjoy the “intellectual debate” with our clients and friends that these opinions generate.
Greg Powell, CIMA
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