Jobs and Earnings To Set the Tone

Today is the data parade starting with the Jobs Report. The expectations are to add 170,000 new jobs and the rate to drop to 7.7% unemployment. That isn’t exactly the numbers we need to produce a growing economy. The optimism around gaining jobs has not been in the headlines since the November elections were held… interesting observation. The jobless claims weekly have fallen during most of January, but the seasonal data has impacted the reports. I am not expecting any major surprises in the report, but anything above 200,000 could have a positive impact on investors today and looking forward.

Of course we can’t start a new month and a Friday during earnings season without some big announcements to start the day. Exxon, Chevron and Merck lead the parade of earnings prior to the open this morning. The energy sector has enjoyed a solid run higher after breaking above resistance on January 15th. Watch the data released by both as they will give insight into some of the question relative to crude supply, refining, jobs and natural gas. These two conglomerates are key data points in the sector. Merck could reinforce what we learned from Phizer relative to earnings and revenue growth in the pharma stocks. The sector has stalled the last two week after a solid jump higher the first of January. The earnings may get lost in as the jobs report will garner most of the headlines, but they will be worthy reading for information in two key sectors going forward.

Gasoline has been on the rise since January 16th gaining more than 10% on UGA, United States Gasoline ETF. The challenge is the increase is heading towards the pump and will act as another tax on the consumer. This will add to the burden of the renewed payroll taxes hitting paychecks in January. How much of an impact this will have going forward is something to watch. The retail sales data for January will be out next week and it will give some insight into the payroll tax on consumers. Adding the additional burden of the higher gas prices could take its toll. As we say frequently if you are  consuming something and find yourself complaining about the prices… maybe you should be buying it as an investment. Gasoline has been one of those cases over the last two weeks.

China was down today as the official manufacturing purchasing managers index fell to 50.4 in January from 50.6  in December. It remained above 50 showing expansion, but the concerns relative to the drop versus further growth concerned investors. Watch how this impacts the trading in the US ETFs. FXI, China 25 Index ETF is trading sideways in a trading range and this could impact the fund to break from the range and test the next level of support lower.

Japan continues to benefit from the devaluation of the yen. Dropping again on Thursday FXY hit a new low of $107.18. EWJ, Japan Index ETF has moved back near the $10 resistance and looks ready to make a break higher after consolidation for the last four weeks. Watch the yen for signs of further weakness which short term will lead to higher stock prices based on the current trend.

The global markets overall have provided a positive boost to portfolios the last three months. The question now being raised… are they overbought. Like the US markets they have produced double digit gains. A chart of EFA, iShares EAFE Index ETf shows the solid uptrend in play for the developed markets ETF. It doesn’t surprise me to see the questions relative to being overbought as the headlines. By a crude guess, about one out of every three state this as an issue for investors short term. If you are a short term investor this should concern you, but most short term investors have some discipline in place to control their downside risk. Thus, getting fixated or worried about the pullback or correction if, and, or when it takes place, isn’t where the focus of your energy should be. Set a point that you want to be out of positions if the downside evolves, set your stop and keep moving forward. The more you labor or worry about an event such as this the less effective you become at managing your money.

Watch the open today for sentiment insight on the data reports we discussed above. They may set the short term tone for the market.