Is QE3 Coming? (msft, nok, jpm, c)
The ADP Payroll report is out – and it is bad. As in, not at all good. Not even a little. According to payroll processing firm ADP, payrolls in the U.S. rose by 38,000. Expectations were a bit rosier, at 170,000. Some sources were even looking for 190,000.
This sure doesn’t bode well for Friday’s Non-Farm payroll number. 180,000 jobs are expected for May. We’ll see if the government statisticians can pull a rabbit out of Uncle Sam’s hat. It would seem unlikely.
But on the other hand, the ADP report hasn’t been the best indicator for Non-farm payrolls.
We must consider what incentive corporations have to hire more. Profits are at record levels and productivity has surged. Demand is not increasing by leaps and bounds – so why add workers and capacity when there seems to be a sustainable balance between demand and production?
Of course, this is not the ideal situation. Far from it. But like I have observed, many jobs that were lost in construction, real estate and mortgage lending were “bubble” jobs and are not likely to return. And if you consider that the housing bubble started in 2004, then much of the recovery in employment after the Internet bubble was an illusion.
*****I expect the analysts and strategists who have been pushing the economic “soft patch” talk are getting a bit nervous this morning. This is starting to look worse than a “soft patch.”
We haven’t talked about banks lately, but they have not been trading well lately. Even when the stock market has been strong, banks have been weak. Citigroup (NYSE:C) has been moving lower ever since its 10-for-1 reverse split. Bank of America is now trading at its tangible book value.
Even one of the perceived leaders of the financial sector, JP Morgan (NYSE:JPM) is off 3.5% today.
Financials are usually considered a leading indicator for the stock market. Rallies are thought to be stronger when the financials are out in front. And the recent move higher for stocks has been conspicuous in that the banks didn’t really participate. And now, banks are out in front of the market sell off after the bad employment data…
*****Of course, the weak employment data will raise expectations for QE3…
*****One final note: in an apparent response to recent criticism, Microsoft (Nasdaq:MSFT) is reportedly making a splash by agreeing to purchase Nokia’s (NYSE:NOK) handset business (after all, Nokia wasn’t doing anything with it).
This is a pretty radical move for Microsoft. I can’t help but think it’s related to Microsoft’s recent Skype acquisition. Could Microsoft be planning a mobile Skype phone? That would at least be interesting…
