Friday, April 03, 2009

Economists Surprisingly Accurate On Today's Jobs Report

The big bad jobs report didn't come in as bad as feared, and the market is pulling back only slightly as a result. You could even argue that the selling is more profit taking after a nice rally, rather than a reaction to the headline jobs report.

The nonfarm payrolls report showed the economy shed 663,000 jobs in March, in-line with estimates. The unemployment rate ticked up to 8.5%, also in-line with estimates, from 8.1% last month. These numbers are not good, and won't help consumer sentiment, but for investors they are a lagging indicator. So if you're using the employment numbers to forecast market direction, you've got it backwards.

Research In Motion (RIMM) reported strong numbers last night, beating estimates for earnings and margins, and they also raised guidance in a bold statement of confidence. That helped the stock spike some +20% today. Of course, yours truly sold shares yesterday because I was worried about conservative guidance and a reaction like the stock received last quarter. As Bart Simpson says, "Doh!"

Also, IBM and Sun Micro (JAVA) are said to be finalizing their deal to buy JAVA for $9.55, which is still 14% higher than the stock is trading for right now. I guess the market is skeptical of that price tag.

Asian stocks were modestly higher overnight; the dollar is also slightly higher today, which is weighing on oil (below $52) and gold a bit; the 10-year yield is higher again to 2.81%; and the VIX is again just below its 200-day at 41.0. Given yesterday's rally, I would have expected it to break below the 40 level.

Trading comment: The stubbornly high VIX, combined with the overbought market, had me a bit nervous coming into today. As such, I bought a hedge position (SDS) in my aggressive accounts in case the market got whacked today. But it looks like that is not going to be the case, so I am scaling out of that position for a small gain.

I still want to add to my long exposure on a pullback, which might be a little too consensus at this point. Hard to say. But at least I have had enough long positions on during this rally that we are still ahead of the market on the year.

long SDS


Post a Comment

<< Home