Feb 2, 2011

Groundhog Day

Feb 2, 2011

Happy Groundhog Day. The big news from Gobbler’s Knob today is that Punxsutawney Phil (shown below) didn’t see his shadow this morning, and predicted we’ll have an early spring.

Equity markets are bid down this morning after yesterday’s snap back rally. On the economic front yesterday’s ISM (see chart below, courtesy Briefing.com) was robust, posting its highest result since May 2004 at 60.8, ahead of the consensus estimate of 58.4. This morning the ADP employment report showed a gain of 187K jobs, ahead of the 140K estimate and below last months’ 247K (which was revised down by 50K). As I mentioned Monday, the big employment reports from the labor Department are released Friday, with expectations for an increase in nonfarm payrolls of 150K and a drop in the unemployment rate to 9.5%. Bloomberg reported that during the recession we lost 2.5 million manufacturing jobs, and have only rehired 140K.

Protests in Egypt continue, with pro-Mubarak demonstrators now taking to the street, including police. The violence appears to be getting worse based upon television reports. Mr. Mubarak has vowed not to seek reelection. The US, long an ally and supporter of Mubarak, has asked for him to create an orderly transition.

The NY Times is predicting that China’s policymakers are still concerned about accelerating inflation and are likely to raise interest rates again, soon.

The EU is prepared to rein in commodity speculation to battle “unprecedented” price volatility. “The volatility of prices of agricultural commodities has recently increased to unprecedented levels. This is the case both on EU and international markets, and on spot and futures markets” stated a report from the commission.

Wall Street is back! The Journal reported that 2010 total street comp at publicly traded Wall Street banks and brokerages topped $135 billion, a new record, and up 5.7% from 2009. At 25 large firms revenues rose to $417 billion, an all-time high. Just think, most of these companies would have been out of business without trillions in taxpayer bailouts.

Brent crude now sits over $100 per barrel, while West Texas Intermediate (the primary US stock) is now at $91. Typically these blends tend to trade together, and most traders are anticipating a rise in the WTI to approach the levels of Brent.

Asian markets were strong last night, driven by optimism after the bounce in the US markets. Automotive and tech stocks were strong in Japan.

Have a great day.


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