Monday, September 10, 2007
Didn't See That Coming!
The markets took a battering Friday. The Dow ended the session with a loss of 249.97 points to close at 13,113.38. The SPX gave up 25 points to 1,453.55
The story of the day was the nonfarm payroll data for August.This employment report for August blindsided the markets as estimates for new jobs created in August of around 120,000 jobs were shattered to the downside. The actual number showed a loss of 4,000 jobs for the month but the bad news didn’t stop there. The July figures were revised down from gains of 92,000 jobs to gains of only 68,000. Even worse the June number was revised downwards from 126,000 jobs to only 69,000. The net result of this report was a drop of 205,000 jobs from what the market was expecting.
This report was a disaster in a period where the market was counting on some decent numbers to provide assurance the economy was still growing. Instead of assurance they got proof that the economy was actually much weaker than expected. This was the first loss in jobs in four years after 47 consecutive months of gains.
This has definitely raised concerns about a possible recession, something the Fed has to take a serious look at. There is no longer is much debate about a rate cut at the September 18 meeting, but traders are now arguing how much the Fed should cut. Fed fund futures are pricing in a 75 percent chance of a 50-basis point cut, up from 50 percent before the payrolls data.
In any event it will be interesting to hear what Fed leaders have to say about this report next week. There is talk that the Fed might cut the Fed funds future rate as early as Monday, even by just 25-basis points. This might help appease the financial markets until more data is available and give them a little more stability.
WHR suffered along with every other stock Friday falling hard over $3. This was obvioulsy not ideal but we are still ok for now.
Until next time.
The story of the day was the nonfarm payroll data for August.This employment report for August blindsided the markets as estimates for new jobs created in August of around 120,000 jobs were shattered to the downside. The actual number showed a loss of 4,000 jobs for the month but the bad news didn’t stop there. The July figures were revised down from gains of 92,000 jobs to gains of only 68,000. Even worse the June number was revised downwards from 126,000 jobs to only 69,000. The net result of this report was a drop of 205,000 jobs from what the market was expecting.
This report was a disaster in a period where the market was counting on some decent numbers to provide assurance the economy was still growing. Instead of assurance they got proof that the economy was actually much weaker than expected. This was the first loss in jobs in four years after 47 consecutive months of gains.
This has definitely raised concerns about a possible recession, something the Fed has to take a serious look at. There is no longer is much debate about a rate cut at the September 18 meeting, but traders are now arguing how much the Fed should cut. Fed fund futures are pricing in a 75 percent chance of a 50-basis point cut, up from 50 percent before the payrolls data.
In any event it will be interesting to hear what Fed leaders have to say about this report next week. There is talk that the Fed might cut the Fed funds future rate as early as Monday, even by just 25-basis points. This might help appease the financial markets until more data is available and give them a little more stability.
WHR suffered along with every other stock Friday falling hard over $3. This was obvioulsy not ideal but we are still ok for now.
Until next time.
# posted by Paul @ 4:21 AM 
