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  • Employment data tops expectations
  • Treasury rates rise
  • S&P tops prior rally high

February 3, 2012

A very pleasant surprise

Futures were roughly flat ahead of today’s jobs report. They made a sharp move higher after it.

Non-farm payrolls rose 243,000, which topped estimates by a wide margin. Private sector job gains likewise considerably outpaced expectations. The increase in payrolls was the most since last April. The unemployment rate fell to 8.3 percent to its lowest level since February 2009. This is the biggest beat versus expectations since the December 2009 report. Private payrolls rose 257,000 in January after a revised gain of 220,000 the prior month. This represented the biggest back-to-back monthly gain since March-April last year. The news prompted futures to point toward a triple-digit opening gain.

If there was a negative in the employment report it was that the labor participation rate declined, which partly explains the drop in the unemployment rate.

At 10 AM the ISM Services Index report added to the market’s gain.

The Index at 56.8 was more than three points above the expected level and more than four points above the prior month. The Index also was about a point above its long-term monthly average.

Many of the sub-components in the ISM report were positive. The business activity measure rose to 59.5 from 55.9. The new orders index increased to 59.4 from 54.6, and the employment component increased to 57.4 from 49.8.

Factory orders were slightly below the expected level but still up 1.1 percent.

Approximately 45 minutes into the trading session the Dow was up 160 points with market breadth more than 5-1 positive.

The S&P 500 rapidly moved above its prior rally peak at 1333.47 as it touched 1342.90 an hour into the session. This obviously put the lower end of the often-mentioned 1350-1370 range in sight. Breaking out of this range will not be done easily but doing so would imply the potential for a rapid move above 1400.

We have to note that the S&P 500 and some other major averages are clearly at extremely overbought levels. An average can remain in an overbought status for an extended period without precipitating a pullback, but this as well as the overhead resistance in the 1350-1370 range suggest that for the very short-term some caution is advisable.

In addition to the good news in the U.S. today, Europe is helping also. Recent reports of purchasing managers data support the premise that economic activity in the region has improved although it remains low relative to recent years. The wildcard still is that a resolution to the immediate debt problems fails to materialize.

Economic data have provided the catalysts for the market’s successful start to 2012 so it is likely they will continue to be major factors in coming weeks.

In contrast to this week, however, next week has a very light schedule of economic reports. They are listed in the table on the next page (in the complete report).


Keep an eye on how the S&P 500 ends today. Remaining above the prior intraday high would be a good sign, but keep the overbought market condition and the approach of a notable resistance zone in mind.

Have a great weekend.

The scope of The Janney Market View Daily is generally limited to commentary regarding economic, political or market conditions and certain of the previous day’s events; but such commentary does not recommend or rate individual securities. It may provide technical analysis concerning the demand and supply for a sector, an index or an industry, based on trading volume and price; but such technical analysis does not include an analysis of equity securities of any individual companies or industries, nor does it provide information reasonably sufficient upon which to base an investment decision. It may contain statistical summaries of multiple companies’ financial data; but such summaries do not include any narrative discussion or analysis of individual companies’ data. It may contain recommendations for increasing or decreasing holdings in particular industries or sectors; but it does not contain recommendations or ratings for any individual securities. It may analyze particular types of debt securities and may comment on characteristics of debt securities; but it does not include an analysis of any individual securities or companies, nor does it recommend or rate any individual securities or companies.

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