Employment Shock: The Market Declines for WIR
The market soared higher yesterday. I can't say volume was great, but it did increase. Financials were a big part of the rally, which was great to see because that sector has certainly slumped behind over the past three months.
The big banks popped yesterday after a better than expect ADP jobs number was announced. And JPMorgan (NYSE: JPM), Bank of America (NYSE: BAC), Citi (NYSE: C) and Wells Fargo (NYSE: WFC) rallied 1.7% from that news. The ADP reported that in June 157,000 private jobs were added, which was ahead of the 70,000 widely expected and the 36,000 in May.
The increase in jobs is important to the big banks because when people have jobs they typically pay debt on-time. And with a record number of residential units behind in mortgage payments and a record number of homes "underwater" a good employment statistic can go a long way towards boosting a stock price.
Today we have received the official government numbers for June employment. The two big metrics to focus on are nonfarm payrolls and the unemployment rate, but average workweek and hourly earnings are important too. The expectations were for 125,000 jobs to be added and an unemployment rate of 9.1% - unchanged from May. The official government report showed that 18,000 jobs were added in June which took the U.S. unemployment rate up to 9.2%. This news completely erasing yesterday's employment news, but let's see if the gains are also erased as quickly.
The market is past key resistance, but that doesn't mean it will not consolidate further before new highs. The rally off the 1250 low has been incredible. But the market is now trading in extreme overbought levels. The sideways move on Tuesday and Wednesday was not long enough to work off overbought conditions, but it was clearly enough for higher highs and we could retest May highs before a significant pull-back takes hold.
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