Unemployment Rate Rises to 15-year High, But Its Still A Lagging Indicator

The market is lower in early trading after the jobs report showed that unemployment reached a 15-year high. I would note that lately, weak market opens have strengthened into the market close. We'll have to see if this pattern shows up again today.

Nonfarm payrolls declined 524,000 in December. November figures were revised higher as well. The unemployment rate jumped to 7.2%, the highest level since January 1993. But before you get too bearish because of this datapoint, remember the unemployment is a lagging indicator for the stock market. That is, it often peaks after the market has already topped, and it oftens hits its lows well after the market has put in its own lows (which could be the case back in November).

Asian markets closed lower overnight, despite more rate cuts by central banks. The Bank of Korea cuts its benchmark rate by 50 basis points to 2.50%. I think that the ECB will be next to cut rates, as economic growth in Europe continues to slow.

In corporate news, it is not a good day for companies that start with the letter "C":

• CVS cut its earnings forecast and its stock gapped lower by -10%
• Chevron (CVX) also cuts its profit outlook, saying lower oil prices have hurt its profits.
• Coach (COH) also warned of lower profits (no surprise there), and its stock gapped lower and is moving below its 50-day average
• On the plus side, Apollo Group (APOL) reported better-than-expected earnings and that stocks has gapped up to a new high on strong volume

The dollar is higher today vs. the Euro, but lower vs. the Yen; oil is trading lower again, back down below the $40 level (I have been saying not to chase oil); the 10-year yield is also lower, near 2.40%; and the VIX is roughly flat, a good sign in a down market, at 42.48.

Trading comment: A few days ago I mentioned that I was taking profits in my trading long positions as I felt the market was getting too overbought, and sentiment had become too complacent. The S&P 500 is down roughly -5% from its highs on Tuesday. This is a sufficient pullback for me to look to start buying back those trading positions, and I will look to buy some ETFs today.

long SSO