Contrarian rally as investors shake off jobs data
Small-cap stocks pushed higher early Friday as investors chose a “glass half full” approach to this morning’s dreary employment data, hoping that the bad news will push lawmakers to move quickly next week to bolster the economy. At 9:54 a.m. ET, the Russell 2000 (NYSE:IWM) was up 6.44, or 1.41% at 461.52.
The employment report showed a decline in non-farm payrolls of 598,000 jobs, which was above the consensus projection for a decline of 525,000, but in line with some of the high “whisper” numbers making the rounds in recent days. The 598,000 figure marks the largest monthly decline in payrolls in 34 years, and the unemployment rate climbed to 7.6%, the highest level in 16 years.
By any measure, the jobs report presented a bleak picture of the U.S. economy, but there were some thoughts that the dismal reading will simply prod lawmakers to be more aggressive in agreeing to a big stimulus package. Our neighbors north of the border are sharing in the pain as well – Canadian job losses for January were the worst since their data history began back in 1976.
President Obama is slated to hold a press conference Monday evening, and there was talk that details of the stimulus plan will be coming out Monday as well. The initial response to today’s jobs report was interesting because ancillary markets did not react like it was a big bearish surprise for stocks. For instance, copper prices retained gains, the gold market didn’t shoot higher and credit markets didn’t go into rally mode. The copper market is considered a key economic benchmark and traders there are hoping that stimulus spending in China and the U.S. will stem the economic slide.
European stocks were higher into the jobs release today and although they dipped briefly on the headline figures, they climbed to new session highs before the U.S. stock market open. European traders also showed a knack for shrugging off bad economic news, with U.K. manufacturing numbers at the worst levels in 30 years overnight, and German industrial production notching the biggest slide in 18 years.
In overseas trading, bank stocks, automakers and chipmakers were strong performers, and here in the U.S., Bank of America Corp. (NYSE:BAC) was in rally mode early today, climbing 11% on the opening following a “buy” recommendation from analysts. Bank stocks around the world are hoping that the bailout plans and spending decisions from the Obama Administration will help shore up bank balance sheets, especially with talk circulating that toxic assets are once again the target of the spending.
Crude oil prices were tanking this morning, sinking some $2 dollars a barrel, one of the few markets extending losses post-jobs. Crude oil traders remain concerned about the global demand picture, and there are also some technical market events in play right now that are weighing on U.S. crude prices, including a large supply at the delivery location for crude prices (hence the big spread to London right now) and also the “roll” from commodity funds out of front-month contracts. Shortly after the open, energy shares were off about 1.4%.
Individual small-caps on the move this morning included Synchronoss Technologies Inc. (Nasdaq:SNCR), which gapped higher and gained 20% as the transaction software firm got a boost from earnings news. MICROS Systems Inc. (Nasdaq:MCRS) also gapped higher and rallied some 21% as the IT specialist was another company on the bright side of the earnings picture. Dick’s Sporting Goods Inc. (NYSE:DKS) rallied 15% as the sporting goods retailer announced preliminary quarterly results. On the downside, Healthways Inc. (Nasdaq:HWAY) tumbled 22% as the healthcare solutions firm released guidance numbers.
The chart structure has eased into a mini-trading range within the elongated extended trading range. This new mini-range is defined by 474 on the upside and 431 on the downside. For today’s session, look for support at 450, 444.50 and 439.50. Meanwhile, resistance comes in at 466, then at 474.
