Wednesday, February 02, 2011

ADP Jobs Report Strong For A Second Month

The market is mixed in early trading, as earnings reports continue to roll in as well as some economic data.

On the earnings front, we are seeing positive reactions in names like APKT, DIS, ERTS, and CAT. Negative reactions to earnings are hitting stocks like BRCM, AFL, and WHR (to name a few).

In economic news, the ADP Employment report showed an increase of 187,000 jobs in January, above expectations. Last month's figure was revised lower to 247,000, which is still the highest tally since 2006. The early consensus for Friday's payrolls report is for a gain of 140,000.

Asian markets were higher overnight, while China was closed for a holiday. The dollar is higher today, which could be weighing on gold prices. Gold is a bit lower to $1337. But oil prices are higher today near $91.35.

The 10-year yield is higher again at 3.45%. It would need to top 3.56% to break out above its recent 6-week range. The VIX is a touch lower near 17.50.

Trading comment: Yesterday's action was surprising in its strength. Some of this was likely a combination of short-covering by hedge funds that loaded up on the short side when Egypt broke out, as well as some first of the month buying by mutual funds. There are plenty of strategists out there still calling for a pullback this month, but so far their calls have gone unanswered.

While the market leaders corrected late last week, other sectors like energy and ag took the lead. So it was more of a market rotation than a full blown pullback. I have added to a couple names recently (EMR, WDC, etc). So while I still have cash to put to work, I want to take advantage of specific buying opportunities as setups present themselves.

long EMR, WDC, VIX calls


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