How Unemployment Numbers Will Impact The Stock
Market
The Dynamic Wealth Report
January 9, 2009
Record Jobless Numbers CRUSHING The Market
The second I stepped into my car I knew today would be
interesting. On my daily commute, I always tune my radio to the
Financial News Network. It’s an all business/all news radio program. I
guess studying the market ten to twelve hours a day isn’t enough for me.
I’ve got to listen to market commentary on the drive to and from the
office… and read about it on weekends.
But I digress.
I listened intently to the radio on my drive in. The Labor Department
released the nation’s jobless numbers. In a normal economy, the jobless
number is looked at then quickly forgotten. Often it’s just one of
thousand of indicators. Indicators used by economists to measure the health
and growth of the economy.
In a recession the jobless number takes on a huge level of importance.
See, in a recession the jobless number can be a leading indicator of a
lot of things. One is consumer confidence. Watching co-workers lose
their jobs isn’t a comforting feeling. Your own job security is
threatened.
And that means you’re less likely to spend money…. And less consumer
spending hurts the economy.
Jobless numbers also signal expectations of employers. I know from
working in a number of high growth industries, employees are often
stretched to the breaking point. Only then are new employees added.
Clearly, the desire to maximize employee productivity is very high in
the US.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
Once jobless numbers start stabilizing, or shrinking, it’s a
sign the economic engine is running again. It’s a great indicator for
how businesses of all sizes see the economy in the next few months.
So enough about jobless numbers. What’s it all mean?
Well, here are the numbers. The Labor Department announced record
unemployment of 7.2% (up from 4.6% in 2007). That’s the highest level
seen in more than 16 years. Last quarter, more than half a million
people lost jobs.
In all of 2008, 2.6 million jobs were lost… the most since 1945.
Folks, these are historic numbers… and they show that the recession is
much worse than many were expecting.
But like anything, beauty is in the eye of the beholder. And market
expectations mean everything.
Believe it or not, the market was expecting higher job loss numbers.
In November and December everyone underestimated the number of lost
jobs. It’s an interesting sign. It might mean employers were quick to
cut back with the weakening economy, and now are being more selective of
job cuts. It could also signal a seasonal slowdown in unemployment (it’s
hard to fire people during the holidays).
It’s the market that matters.
Put all your expectations aside. The true key to this unemployment
puzzle is how the market reacts… and it’s not good. The market’s down
(and down big) on the news. That tells me the jobless number is a focal
point for the recession… and the expectations are for a struggling
economy.
Remember it’s one piece of a thousand piece puzzle.
I’m watching a number of other things. Top of my list are earnings.
Earnings this quarter, and the market’s reaction will tell us a lot
about the future market direction. Bad earnings news, and more moves
lower point to a prolonged recession.
I’m also watching the technical indicators closely. Like the 200-day
moving average.
If you remember, back in early 2008 the 200-day moving average turned
lower. That was our signal to get out of the market. In the next few
weeks this indicator will be important to watch. If it continues lower,
we can expect a few more quarters of a recession (and a much lower
market).
For now, continue to monitor your core positions closely. And don’t be
afraid to continue hedging your portfolio.
•
Chevron (CVX) was upgraded to an “Overweight” at
JP Morgan. The upgrade comes despite the company warning profits would
decline. Who didn’t see this coming?
• Gold Corp (GG) was downgraded by both BMO Capital
Markets & RBC Capital Markets. Interesting to note the downgrades come
in the face of steadily rising gold prices.
• Kaufman Brothers started research coverage on Hewlett Packard
(HPQ) with a “BUY” rating. By my count that makes them the 20th analyst
to cover the stock. I wonder what unique take-away they’ll develop that
19 other analysts haven’t seen.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map