How the jobs report may affect stocks
The Labor Department issues its August report before Friday's open. Investors are looking for data that give the Fed room not to trim its bond buying.
But the big test comes Friday, after the Labor Department releases the August jobs report. The consensus estimate is for the unemployment rate to remain at 7.4%, unchanged from July. Non-farm payrolls are expected to rise by 180,000.
The report will be viewed by investors around the world in the context of the Federal Reserve, whose Federal Open Market Committee meets Sept. 17-18. The big issue then will be whether the Fed will taper its bond buying program, which has kept interest rates low.
Here's how the report, due at 8:30 a.m. ET, could affect markets. And remember that tapering is being interpreted by bond traders as a de facto rate increase. The 10-year Treasury yield has jumped from below 2% in early May to nearly 3% as of Thursday.
A big report -- the unemployment rates falls and payrolls jump more than 250,000 -- could give markets a lift because the economy is growing more strongly than thought. But it would guarantee the Fed would trim back its bond-buying program, and that might curb the enthusiasm.
A modestly positive report -- the unemployment rate falls to 7.3% and payrolls meet estimates -- might excite traders. The Fed wouldn't feel compelled to taper, and stocks would rise in response.
A modestly weak report -- the unemployment rate holds at 7.4% or rises and payrolls come in at, say, 160,000 -- could get the market thinking the Fed will delay tapering. That might depress interest rates but lift stocks. Stock prices move up when rates fall.
And a bad jobs report -- the jobless rates moves higher and payrolls are significantly weaker than expected -- could generate a sell-off, reflecting worries about the economy.
Several things to watch in the report:
Changes in private payrolls. The ADP National Employment Report, released Thursday, estimated private-sector employers added 176,000 jobs in August, a little weaker than the 180,000 expected but in line with the average over the last two years. The Labor Department's data have put private sector gains at about 193,000 a month for the last two years.
Changes in government payrolls. Sequestration and deep cutting in state and local governments has been a sizable drag on the economy.
Construction employment. It fell in three of the last four months ending in July. Part of the issue may be more rain in some parts of the country. Higher interest rates also may be taking a toll.
Wage gains. Wages fell back very slightly in July and have risen just 1.9% over the last year.
Hours worked. The average work week has been holding at about 34.4 hours for at least a year.
The lack of wage gains and stagnant hours are often cited as a reason why retail sales have been stagnant. But auto dealers reported a very buoyant month of sales in August and expect the trend to continue.
The Dow Jones industrials ($INDU) finished Thursday up 7 points to 14,937. The Standard & Poor's 500 Index ($INX) added 2 points to 1,655. The Nasdaq Composite Index ($COMPX) rose 10 points to 3,659.
The major averages are looking at a winning week, which would be welcome. The Dow is up 0.9% for the week, with the S&P 500 up 1.4% and the Nasdaq 1.9%. The Dow has fallen for three straight weeks; the S&P 500 and Nasdaq for two of the last three weeks.
Healthcare, oil service, steel and airline stocks led the market. The laggards were gold, real estate and utility stocks, all sensitive to rising interest rates.
UnitedHealth (UNH) was the Dow leader; 15 of the 30 stocks in the index were higher. Microsoft (MSFT) was up 4 cents to $31.24. It had fallen in six of the seven prior sessions and is down 6.5% this week. (Microsoft owns and publishes Top Stocks, an MSN Money site.)
Fastenal (FAST), which makes tools and fasteners, was the top performer among S&P 500 stocks and second-best among Nasdaq-100 stocks after Sears Holdings (SHLD). Some 284 S&P 500 stocks were higher, along with 58 Nasdaq-100 ($NDX) stocks. The index was up 5 points to 3,130.
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The "earnings" that move the rigged markets are fake, driven by printed money, deficits, and chinese job shipping. I guess it doesn't matter what happens to our country or the people as long as Wall street speculators get their stinking short term profit. Aren't those harvard grads at goldman sacks great?
The Jobs Report is just as accurate and or inaccurate as it has always been for decades. Nothing has changed concerning that in spite of those telling you otherwise. What has been under reported, the Underground Economy which has been soaring. Wall Street has built excuses regardless of what the Job Report is. However, if the ten year hold 3% or more while crude prices kept rising, the Job Reports will be the least of the near term worries.
Earnings is what moves the market.Only idiots who don`t know the stock market from the
super market cry fiat money.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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