WASHINGTON, September 4, 2014 – U.S. stock market indexes look to open up this morning. Problem is, that’s what they did yesterday before turning in a miserable but predictably unenthusiastic post-holiday performance.
This morning’s open, at least, may get a half-decent goosing from the ADP August payroll numbers, just reported. ADP, for those who may not be aware, stands or used to stand for “Automatic Data Processing.” It has been for years the go-to company for small- to medium-sized that want to help manage overhead their expenses in part by outsourcing payroll processing and paycheck issuance.
Keeping in mind that the ADP numbers are well-known for their dubious accuracy when compared to the somewhat firmer (although still misleading) Federal numbers yet to come, the monthly report, mostly derived from their own payroll processing numbers, still gives a pretty good indication of the direction of employment if not the precise quantification.
ZeroHedge provides as good a summary as you’ll find regarding a read of ADP’s data tea leaves:
In what will hardly be a good sign for tomorrow’s “critical” non-farm payrolls report, moments ago ADP reported that in August only 204K private payrolls were created in the US economy, below the downward revised 212K in July, and below the consensus estimate of 220K. The good news, as Carlos Rodriguez, president and chief executive officer of ADP said, is that “August marks the fifth straight month of employment gains above 200,000, continuing an encouraging trend for the U.S. labor market.” Just barely. The bad news: this was the lowest ADP print since March, and hardly the “lift off” trend that many were expecting. Notably, the June 281K jobs print was revised even higher to 297K the highest in years and makes one wonder how much forward demand was pulled back into Q2 as a result of abnormally easy credit conditions and generous government spending.
What we’re really dealing with is another dismal employment report. Again, the Federal report is likely to be a little better and a lot more accurate, at least in terms of its dataset. But ADP points to the continuing trend of ± 200,000 job increases which tend, fairly quickly, to get undercut only a bit later by big layoffs, like the ones currently happening in Gannett’s (GCI’s) newsroom. (Gannett publishes USA Today and other newspapers in a fast-declining industry.)
As we’ve reminded our readers endlessly, back near the end of the Bush Administration and the beginning of the Obama Regime, the financial punditocracy kept telling us that monthly jobs-added numbers in excess of 300,000 would actually be needed to get the nation back to more or less full employment in a reasonable period of time, i.e., the usual time it took to recover from past recessions.
Granted, the Great Recession was a bad one. That said, however, we’ve had 6 years now of the Obama Regime—you know, the one that supports the middle class—and we have yet to receive a monthly number that’s anywhere near the 300,000 liftoff point.
That’s probably the reason why the financial press gets so excited about 200,000 + monthly numbers, even if they’re only from ADP. As is typical of leftist propaganda mills throughout the world, if the numbers don’t happen to be going their way (which they rarely do without severe manipulation), they do the 21st century equivalent of defining deviancy down.
In other words, they create the impression that the current 200,000 figures are the new 300,000, all the better to give the current Regime that glowing veneer of success. That’s despite the fact that, as our Branco cartoon above notes, the Regime has done everything in its power to stifle initiatives and industries that would love to create jobs except for the fact that, for the coal industry in particular, Obama and his eco-freak pals in the rogue EPA want to put certain industries out of business
While all this is true, markets today will, at least initially, see this ADP number as “good news.” Since in reality, the 200,000 level of jobs added is (secretly) more bad news for what’s left of that allegedly “saved” middle class, that could mean the Fed will hold off on interest rate increases “longer than expected,” thus continuing to boost stocks, at least in the next quarter or two.
But the HFT machines don’t care, so as we write this (9:38 EDT), the Dow, the S&P 500, and the NASDAQ are all up rather nicely, reversing at least for now much of yesterday’s nattering negativity.
Markets also seem to be encouraged by more “negotiations” between Ukraine and Russia’s Vlad the Impaler. Vlad, apparently, is now taking a page out of Hitler’s Sudetenland playbook, offering to leave Kiev alone for only a “little bit” of that country’s eastern frontier. What he’s not mentioning, of course, is that he’ll be back for another snack a bit later. Like maybe once the French have actually sent him those previously owned warships they’ve now finally decided to withhold from the Russian Navy.
What this has to do for stocks, of course, is positive. Since now there’s a potential that Vlad will be “appeased,” and will be nice again, bulls can breathe easier again. Until the next time.
This is what happens when headline-driven HFTs and algos move stocks one way or the other without regard to charts or financials. But Wall Street’s attitude seems to mirror that of “The Godfather’s” Hyman Roth, who opined, “This is the life we have chosen,” or something like that.
Today’s trading tips
Still thin in this department. We’ve tended to be bearish even as the market has continued to melt up in 2014, save for that late-July heart-stopper of a selloff. That’s kept us from profit bragging rights, although we have made money, primarily through high-yield vehicles and some good guesses.
We liquidated our fairly large Valero (VLO) position over the last two days because, after a 10-12% rise from where we got in, we could see significant profit taking underway.
Ditto our Bank of America “A” warrants (BAC/WS/A in Schwab parlance). Yesterday’s news about more Dodd-Frank big bank torments whacked that sector, which was trying to recover, and the market is getting too close to a correction (we think) to risk carrying the position and watching our 10% profit erode.
Other than that, we’re maintaining our small position in the S&P 500 short ETF (SH) as a hedge, even though we’re slightly down. And we may add to it today if the market maintains its irrationally exuberant tone, even in the face of the looming Caliphate.
But that’s likely it for today, save for the fact we’re continuing to hold a pretty big position in YAHOO! (YHOO) vs. the Alibaba IPO which, we hope, will drive this otherwise miserable stock even higher, given their hefty ownership of the Chicom web juggernaut. We’re already up 10% (again) on this, but hope for more. But we’ll pull the trigger on or around the IPO, assuming something doesn’t cause YHOO to badly tank first.
* Branco cartoon courtesy of the artist via arrangement with LegalInsurrection.
Disclaimer: Financial information in this column reflects the trading activities of the Market Maven, not buy and sell recommendations. Reportage is for educational purposes only. Today’s markets remain highly treacherous, so be careful, be prudent, but travel at your own risk.