Weak Jobs Data Spurs Selling In Early Trading

The nonfarm payrolls report didn't inspire a lot of confidence this morning. Actually, it wasn't the headline figure, which came in at -84,000 jobs lost (vs. -75,000 consensus). This number is still below where it often is during recessionary periods. But the unemployment rate jumped up from 5.7% to 6.1%, which I believe is a 5-year high.

The 10-year yield is falling further, to 3.58% this morning. The other day I commented that lower yields were likely signaling reduced inflation expectations, but the continued drop to these levels surely is a sign that the bond market is growing more worried about economic growth.

2Q GDP was very high, above +3%, but it also had the benefit of the government stimulus checks. GDP in the second half of the year is likely to slow much more as the credit/housing malaise lingers.

The dollar is mixed this morning, and oil is falling for a 6th day, now below $107. I think the energy and materials stocks are getting way oversold, like the financials were in July, and a sharp rally could ensue at any time.

That said, I am staying defensive until I see signs of a more meaningful bottom, one that includes the spikes in bearish investor sentiment seen at prior bottoms.