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Need to Know
APRIL 05, 2013
6 crucial gut checks before the
stock market's opening bell
Good
morning.
It's not just about jobs, it's about mojo . A very disappointing March rise in
nonfarm payrolls (more below) will feed fears of the broader economy is
headed for a spring swoon -- repeating a pattern seen
in 2012 and 2011.
The U.S. economy created just 88,000 jobs in March versus a revised
268,000 in February, well below the 190,000 forecast by economists.
On the other hand, "the market is assured that the U.S. Federal
Reserve will not be taking its foot off the quantitative-easing gas pedal
any time soon," wrote Douglas C. Borthwick, managing director at
Chapdelaine Foreign Exchange in New York.
But even without Friday's subpar jobs performance, some strategists were
already convinced equities had divorced themselves from fundamentals -- at
least as far as the jobs picture was concerned. Strategist Brian
Jones and crew over at Societe Generale contend the continued rally in
equities and other "risky" assets can't be justified by the
pattern so far in nonfarm payrolls.
It would have taken a payrolls rise of more than 300,000 "will bring
closer the model and the market values for S&P500 and the 10-year
U.S. dollar swap rate," they wrote.
Key market gauges: Hong Kong stocks plummeted Friday , laid low as the death toll in China tied to a new strain of bird flu rose. Stocks in
Japan rallied for a second day, basking in the afterglow of the Bank of
Japan's decision to cut loose with heavy-duty monetary stimulus.
George Soros says the Bank of Japan is playing with fire .
U.S. stock index futures extended losses, pointing to a sharply lower open for Wall
Street, while European markets plunged.
The economy: You know about the payrolls report. The
unemployment rate, meanwhile, dipped unexpectedly to 7.6% from 7.7%.But
while that's the lowest rate since December 2007, it came as fewer
Americans looked for work.
The buzz: Facebook Inc. continues to trend high
on StockTwits, a day after it extended gains following the unveiling of
Android software for mobile devices called Facebook Home.
Is a Facebook-centered phone bad news for Google Inc. ?
The Autonomy saga continues. Hewlett-Packard Co. Chairman Ray Lane stepped down Thursday to be
replaced, at least temporarily by board member and activist investor Ralph
Whitworth.
CEO Meg Whitman has so far dodged investor wrath. See: H-P yields, but not enough, to discontent.
The chart of the day: So much for the Great Rotation out of fixed income .
Michael Harris at the Price Action Lab Blog senses that bond-market bears
are getting ready to throw in the towel as bond yields resumed dropping against a backdrop of
rising stocks. Of course, when they finally give in, the way will be clear
for yields to rise.
Take a look at this chart of the iShares Barclays 20-plus year Treasury
bond ETF :
"TLT
is set to test resistance at $120.70. A breakthrough would set up a test of
the 200-day simple moving average resistance at $122.47," Harris
writes. The relative strength index, a technical indicator, "is
rising fast toward overbought territory," Harris writes, while his
proprietary MEI indicator also signals growing momentum.
The call of the day: Investors are worried that Netflix
Inc. is beginning to lose momentum after a rough week,
though it remains up 80% since the start of the year. Shares gapped to the
upside in January after an unexpectedly strong earnings report.
The folks over at CrackedMarket see Netflix, which closed Thursday at
$166.69, looking for a bottom at $160, but warn that shares of the
video-streaming and rental firm -- and other high-flyers -- won't be the
place to be in the event of a bigger market decline:
The biggest concern the stock getting caught up in bigger market weakness.
If the market breaks down, NFLX and all the other high-flyers are a
bad place to hideout. These high-beta stocks will fall two or three
times as much as the market.
Random reads: Tributes are rolling in for legendary film
critic Roger Ebert, who died Thursday after a long battle with cancer.
Salon.com reprints a meditation from the man himself
on his own mortality.
Pork-chop night will never be the same.
The meat industry apparently thinks terms such as "pork chop" do
consumers a disservice, so they've come up with a slew of fancier names for pork and beef
cuts.
--William L. Watts
Follow on Twitter @wlwatts
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