Friends
As we know, May ended up being a very difficult month for risk assets with the Dow and the S&P down more than 6% for the month. Well, the first day of June continued the pain. This morning’s release of the government’s non-farm payroll number was a major disappointment. Instead of the expected 150,000 new jobs to have been created, all we got for May was 69,000 new jobs. Along with a slightly disappointing ISM manufacturing number, the jobs number was enough to send the bulls scurrying and embolden the bears. As many of you know who have been with us since the financial calamity in 2008, we have continuously said it is all about jobs, jobs, jobs. If we don’t get that going in the right direction, we won’t make real economic progress.
For the day, the Dow Jones Industrial Average was down 274 points to close at 12,118. The S&P 500 was down 32 points to finish the day at 1278. Gold was up big, with the precious metal gaining $60 to trade at $1623. Gold was buoyed by the belief that more monetary stimulus is in the cards, not only domestically but in Europe and China as well (sure, more debt and easier money will solve the problem-it’s worked wonders so far!). Oil was clobbered again, as WTI was down $3.27 to trade at $83.26.
Looking at the technical picture, both the Dow and the S&P broke their 200 day moving average and have now declined over 10% from the highs posted earlier in the year. That puts both in correction mode (drops of 10 % or more are called corrections-drops of 20% or more are called bear markets). The Dow now stands in negative territory for the year and the S&P is not far from it. If we were to objectively look at the data that we have received domestically since the beginning of the year, not to mention the pressures from Europe and China, the stock market is probably about where it should be. That big move in the first quarter was obviously overdone, now that we see where the data has come in. The technical damage that has been done might take some doing to repair, so the next few weeks could be volatile.
For those who are politically inclined, today’s job weakness sure does put Governor Romney in a much stronger position vs. President Obama. Maybe market participants will see that as a positive going forward. In addition, the bulls might just get another round of stimulus from the Federal Reserve, so you can find a bright side from today’s mess if you need to.
Just a quick update- Faceplant (I mean Facebook) has just finished the worst first 2 weeks for an IPO since 1995. Ouch! Perhaps just a sign of the times.
We’ll be here to keep you informed as June unfolds. Remember, volatility creates opportunity.
Have a nice weekend everyone.
