Friday, February 04, 2011

Jobs Report Disappoints Again, Despite Surprising Drop In Unemployment Rate

The market was higher in early trading, but has since started to rollover and give back its early gains. Earnings reports have been good for the most part, but the economic data was mixed.

The nonfarm payrolls report for January was disappointing. Economists were looking for 148,000 jobs to be added, but the number came in at just 36,000. And private payrolls added was just 50,000. That's not the robust employment figures we would expect at this point in the economic recovery.

The unemployment rate fell from 9.4% to 9.0%. This doesn't really job with the small increase in payrolls, and is actually a result of changes in the calculation in prevailing population estimates. That is the kind of stuff that leads people to believe the numbers are being fudged.

On the earnings front, fiber optic stocks are on fire this morning after a strong report from JDSU. Stocks like AET and SRCL are also higher after earnings. On the disappointing side are LVS and CSTR.

Markets in China and Hong Kong remained closed for holidays, but Japan gained 1.1% overnight. Europe is slightly higher this morning.

Despite the lackluster jobs report, the yield on the 10-yr Note is moving higher, and breaking out of that 6-week trading range I have been commenting on. Today the yield is up nearly 10 basis points to 3.64%.

As for the volatility index (VIX), it is moving lower to 16.67.

Trading comment: More leading stocks are coming out of their recent corrections and look poised to move to new highs. CMG looks good, as does LULU. Yesterday we bought a little PCLN, which also looks poised to breakout to new highs soon. And the list goes on. After a big run in the energy sector, we could be seeing some rotation with profit taking in those names and buying resuming in the tech sector. Networking stocks are strong, chip stocks are up today, and cloud computing stocks are making a comeback as well. Happy hunting.

long PCLN, VIX calls


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