Daily Market Update – June 3, 2015 (8:30 AM)
With the ADP Employment Report coming this morning and setting the tone for what’s to be expected with Friday’s Employment Situation Report, the pre-open futures are again optimistic, as they were on Monday.
If that tone continues it would be the third day in an alternating pattern of direction, but there was some good news in both of the previous days this week, especially yesterday, as a meaningful early loss was reversed.
This morning, prior to the ADP release, the futures are already more than 100 points higher, probably in anticipation of a number that falls squarely and comfortably into the range of what most are expecting or hoping for.
Most neither want a number too good nor too weak.
Most would be very happy with economic data that is ambivalent. No one wants any suggestion of an economy heating up, nor as last week’s GDP data suggested, an economy that was shrinking faster than expected.
Whatever side you’re on, it all still comes down to what may be an irrational fear of the initiation of an interest rate increase.
History has shown that the market very quickly recovers from what never should have been a shock in the first place, as the early rounds of interest rate hikes are implemented. So it’s hard to understand why the markets have been so fixated on an action that should be considered to reflect good economic news. Additionally, the early stages of interest rate hikes typically are followed by more economic growth and not a slowing down.
But old pre-conceived notions are hard to give up.
That ADP number turned out to be slightly less growth in the private sector job market than had been expected. The futures gave up just a little ground on that information, but essentially did nothing, as it came in as expected.
Hopefully that tone will continue for the next few days as we try to get out of this week with some combination of assignments and rollovers.
While there may not be too much trading in the personal account this week, it is at least much more busy than it was last week. Another positive is that this week has an unusual number of ex-dividend positions and that income is very much welcome after a week last the past one.
For now, and probably for the rest of the week, there’s little likelihood that I’ll be adding more new positions. I would much rather see the number of existing positions get reduced and add more to my cash pile. As we continue to teeter at these levels and without any clear indication of what is coming next, my preference would be to have more cash than to have more risk.
But to get there, it will take some more moves higher and some more record closes, so I’m hopeful that Friday’s big event will be the kind of non-event that the market interprets in a bullish way.
While there’s not too much in the near term that should be able to act as a catalyst to move markets higher, with each passing day we get closer to the next earnings season that begins in just 5 weeks.
That is one that has had low expectations set for it as most were forecasting USD and Euro parity and that hasn’t been the case, so top line revenues and profits should be better than the guidance that so many companies had offered.
One possibility, however, that may not require having to wait 5 weeks for that catalyst, is if companies begin to change their guidance before earnings are released. That’s more commonly done when the news is bad, but sometimes it goes the other way, as well.
If that’s the case, hopefully we will be smart enough to realize that good news should b