Services Sector Ends Contraction Streak
The ISM services index ended its two month contraction cycle as the index increased from 49.8 in December to 50.5 in January. This reading was basically in-line with the consensus of 51.0. Also, the ADP Employment Report showed fewer job losses in the private sector (-22,000) than forecast. Hopefully this will translate into a better payrolls report on Friday.
More earnings reports are rolling in, with mixed reactions. Stocks like Netlogic (NETL) are surging, while insurers like MetLife (MET) and Aflac (AFL) are mixed. Both of them topped expectations, but MET is lower while AFL is higher.
The dollar is trading higher today, but commodities are hanging in. Oil is above the $77 level, while gold is roughly flat near $1115. Asian markets rallied overnight, with China bouncing +2.4%.
The 10-year yield is higher to 3.67%, and the VIX is a bit higher to 21.75, as it bounces from its 50-day average.
Trading comment: The bounce over the last 2 days has been nice, but it has come on relatively light volume which means there was not a lot of institutional conviction behind it. Today, large-cap tech is outperforming for the first time in awhile, which is nice to see. Hopefully this will become a trend.
We need to see the broad markets begin to stabilize, and for recent market leaders that are in the midst of corrections begin to form solid bases from which to launch new rallies. I am still holding cash until I see more concrete signs of the above.