Monday Morning Musings

Markets are flat to slightly higher in early trading.  Friday's weaker than expected jobs report could have hit the market harder, but didn't.  It could be that investors are viewing the extreme cold temps as a one-off factor.  But if January's jobs report disappoints again it would be another story.  Most economists are predicting a pickup in the economy in 2014, but weak jobs growth isn't part of that forecast.

Retail stocks are having a rough morning after both Lululemon (LULU) and Express (EXPR) lowered guidance for the quarter.  LULU stocks is down quite a bit.  Ditto shares of SODA which also lowered guidance.

On the plus side, shares of BEAM are 25% higher after Japanese firm Suntory agreed to buy the beverage maker for $83.50 a share.

There is no real economic data out today.  The 10-year yield dropped a significant amount on Friday, given that most investors are poised for higher interest rates.  The 10-year yield is down a little more today to 2.85%.

Also, the volatility index is continuing its downward trend, breaking below the 12.0 level this morning to fresh 10-month lows of 11.90.  The VIX doesn't often stay at these low levels for long and we would not be surprised to see a quick spike higher in the near-term.

Asian markets were mixed overnight.  Japan's PM Abe saw his approval rating increase to 62%.  In China, the Ministry of Finance became the second organization over there to target 2014 GDP growth of 7.5% (with a lower limit of 7.0%).

Europe's markets are mostly higher.  Italy's industrial production rose 1.4%.

Trading comment: It seems we are getting into that familiar pattern where the market works off its overbought condition by trading more in a sideways fashion than a big decline.  Friday's weak jobs report could have hit a weak market hard, but stocks hung in there and even recouped their early losses.  That makes us think that we are probably getting close to another breakout to new highs in the major indexes, which could spur another round of buying and pull some additional buyers in off the sidelines.  The "overdue" correction that many strategists are looking for is still out there, but we don't see signs of it materializing imminently.