Individuals & Families

Resources & Education

Market View Daily

Text Size: Decrease Increase
Print
  • Non-farm payrolls fall less than estimated
  • Private sector employment gains top expectations
  • ISM Services Index short of estimates
  • President repeats endorsement of business tax incentives

Each morning we post a PDF file of our daily comments on the right sidebar under Current & Past Issues. If you would like this emailed to your attention, please contact your Janney representative.

September 3, 2010
Futures ahead of the 8:30 AM employment report hovered around a breakeven. They moved sharply higher after the release of the report.

Overall non-farm payrolls fell 54,000, but this was less than half the expected drop and the prior month’s job loss number was cut.

Private sector employment increased 67,000 and there was a net upward revision of 123,000 for the prior two months. In addition hourly wages increased slightly more than anticipated.

The rapid move up in futures suggested that the Dow would open with a triple-digit gain. Half an hour into the day the Dow was up 130 points.

At 10 AM the ISM Services Index, reported at 10 AM, was 51.5 compared with a reading of 54.3 last month. This report cut the Dow’s gain roughly in half.

In a 10 AM press conference the President reiterated his support for additional business tax cuts as well as an extension of tax cuts for the middle class, investment in clean energy research and development, and infrastructure improvement. There had been speculation that he might propose a withholding tax moratorium, but this was not mentioned in his remarks.

The payroll news this morning prompted a quick move higher, but the progress on job growth still is well shy of what is needed merely to stay even with population growth. The data reported today suggests that progress on bringing the jobless rate down will remain slow for months.

In our view it is not merely coincidental that the market’s recent rally began after a successful retest of support for the S&P 500 at 1040. At the peak today the S&P 500 reached 1105, which was about ten points below where we see an obvious level of resistance. Heading into a long weekend and with volume likely to contract rapidly this afternoon, making much more upside progress today seems to be unlikely.

In contrast to this week, the economic report calendar is relatively light and does not have anything until next Wednesday.

Despite this week’s gain, the market still appears to be range bound, and we would not rule out the potential for another retest of support at 1040. To exit the upper end of the range the S&P needs to have a convincing move above 1130. In time we think this will happen, but on a very short-term basis getting there might be difficult unless the market finds a catalyst to support the move.

The talk of a possible withholding moratorium was off the mark, but now that we are within two months of the mid-term elections we would not be surprised to see a flurry of stimulus initiatives from the White House as it is fully aware that the number one priority in voters’ minds is the economy generally and employment specifically.

Enjoy the weekend and make it a safe celebration of the last holiday of the summer.

Have a great day.

Additional items from Yesterday
Burger King (BKC, $18.86) advanced 25.08% as it agreed to be bought by 3G Capital for $4 billion ($24/sh), including debt. The transaction price represents a 27.25% premium over yesterday's closing price and a 46% premium over pre-rumor share price. The deal is expected to close in the last three months of 2010

SAIC (SAI, $15.37) beat on the bottom line, reporting EPS of $0.42 (vs. consensus $0.33). The beat came from stronger bookings and lower expenses. However, shares fell 1.24% as revenue increased less than expected, up 2% to $2.79 billion. The company raised its full year EPS growth guidance to 14-16% (from 8-14%).

Target Corporation (TGT, $52.24) posted a lower than expected increase in August same store sales, up 1.8% (vs. consensus 2%). The miss came from weaker sales of electronics and home decorations. Management guided September comps to increase in the low single digits. Shares rose 0.59%.

AOL Inc. (AOL, $22.90) gained 0.66% after announcing it has renewed a search agreement with Google, Inc. (GOOG, $460.34). Under the terms of the new five-year agreement, GOOG will continue to provide the search results on AOL's websites but the new deal also expands their cooperation onto AOL sites for cell phones and other mobile gadgets. Moreover, AOL video content will be put on YouTube. The deal includes a revenue share on a per-search basis.

Hovnanian Enterprises (HOV, $3.68) posted a wider than expected loss driven by higher write-down for lands. Revenue and contracts decreased more than expected by 1.7% to $380.6 million and by 37% to 902 homes, respectively. Shares rose 5.43% as management said July sales were modestly better than in June, while August sales were significantly better than in June.

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. Subject to the limited scope of its contents described above, The Janney Market View Daily does not constitute a research report as the term “research report” is defined in Securities and Exchange Commission (“SEC”) Regulation AC-Analyst Certification Rule 500, New York Stock Exchange (“NYSE”) Rule 472.10(2), or National Association of Securities Dealers (“NASD”) Rule 2711(a)(8). The author of The Janney Market View Daily is not a registered research analyst as the term “research analyst” is defined in SEC Regulation AC-Analyst Certification Rule 500, NYSE Rule 472.40, or NASD Rule 2711(a)(5).

The Janney Market View Daily may contain factual information taken from third party sources which we believe to be reliable but the accuracy or completeness of such information is not guaranteed by us. Supporting information will be available upon request. The market view expressed should only be used for information purposes. Nothing in The Janney Market View Daily shall be construed as an offer to sell, or a solicitation of an offer to buy, any securities.

© 2010 Janney Montgomery Scott LLC. All Rights Reserved.

Member: NYSE, FINRA, SIPC