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Switzer's scoreboard - US jobs report

Peter Switzer
6 April 2010

The Switzer Stocks Scoreboard for the start of this Easter-shortened week starts with what was always going to be the biggest wealth building business news story of the week — the US jobs report. And the news was good and that helped Wall Street start the week in positive territory.

The S&P 500 was up over 0.7 per cent as the Dow Jones index closes in on the 11,000 level — a heady height not seen for around 18 months.

Good jobs report

The good jobs news was actually delivered on Good Friday, US time, and it was a nice Easter present.

Non-farm payrolls increased by 162,000 in March and while there were many who expected a number of 200,000 would be the result to excite the market, it was the composition of the figure that became the focus.

This was third time since the GFC recession arrived in late 2007 that payrolls went up but the unemployment rate remained at 9.7 per cent.

Inside the figures was a jump for the hiring of 48,000 temporary Census workers but these were smaller than expected and it meant that the private job market was better than expected.

US recovery

This better jobs result augurs well for the US recovery and this can’t help but affect stocks positively. Since the calendar year started, the Dow and S&P 500 are up around 5.2 per cent and 6.3 per cent respectively and it looks like there is more in store if the US economy can continue beating the doomsday merchants’ predictions.

Two signs that more and more people are believing in the US recovery are the rising interest rate in government bond markets, and the price of commodities with oil over $US80 a barrel and the next stop being $US90!

This should feed into our stock prices with our miners having a big bearing on where our stock indexes head.

More good news

In more good economic news:
  • The ISM services index spiked to 55.4 in March from 53 in February. It was the third month of rises and this is the fastest growth for close to four years.
  • And pending-home sales went up 8.2 per cent in February.
  • Energy stocks rose as oil went to nearly US$87 a barrel. We have not seen these levels for 18 months and this reflects belief in the recovery story.
US watch
The big watches this week in the US will be:
  • Wednesday: Weekly mortgage applications;
  • Friday: Wholesale trade figures.
To raise or not to raise?

This is not a big week for data but speeches and comments could be market movers.

Locally, all eyes are on the Reserve Bank, which decides on interest rates today. The consensus is 50:50 with economists such as Craig James (CommSec), Shane Oliver (AMP) and the Westpac team all saying the bank will not or should not increase rates today. I agree with the latter but not sure if the Bank is out of touch with the real economy. I am feeling that interest rate pain now is less worrying than the fear of four more rises this year. Both businesses and consumers in debt are spooked by the “four more rises” scenario and that’s why retailers are suffering now.

Australia watch

These are the other big watches for the week here in Australia:

  • 6 April Job advertisements (March)           
  • 7 April Performance of Services (March)
  • 8 April Employment/unemployment (March)

The unemployment figure on Thursday will be another reason for the media to go mad on interest rate speculation.

Have a great week.

PS. On Wednesday night I interview Alan Jones on SWITZER and it should be enlightening to hear him answer the questions for a change. This guy’s insights on politics and its impact on business cannot be under-estimated! 

 

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

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