Stocks Called Higher Following U.S.
Non-Farm Payrolls Report On Friday

by James Hyerczyk, Brewer Futures Group, LLC | April 5, 2010

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Stocks are called higher following the U.S. Non-Farm Payrolls report on Friday. At first traders sold the equity markets because the increase of 162,000 jobs was below the pre-report consensus of 200,000. The markets turned around after investors realized that the increase in private sector jobs was better than the guesses.

The strength in the markets today will be determined by investor confidence in the improving economy. If they believe the jobs picture will continue to improve, then look for a rally. If traders believe that interest rates are moving up too fast then gains will be limited.

News that Apple iPad sales were greater than estimated could help drive up NASDAQ futures. This should spillover to the other indices.

Treasury futures are trading slightly better. This is most likely because of oversold conditions. The jobs report put pressure on T-Bonds and T-Notes on Friday. Traders felt this report brought the Fed closer to hiking interest rates. Yields rose overnight in limited trades.

The mixed Dollar is helping to boost June Gold. Traders in this market seem to be betting the Dollar will weaken. In addition, equity investors can’t seem to understand why gold and stocks are both in up trends. The rise in gold and the rise in Treasury yields may think that inflation is going to be a major issue soon.

The improving U.S. economy helped boost June Crude Oil overnight. Last night crude oil broke through the January high at 85.95 to reach a new high for the year. The robust growth in Asian is also helping to drive up demand for crude oil. Gains could be limited today if the Dollar strengthens and the Euro weakens.

The U.S. Dollar is trading mixed overnight following Friday’s rally. Traders drove the Dollar higher on Friday following the U.S. Non-Farm Payrolls Report. The actual report showed an increase in jobs during March, but the 162,000 jobs created were less than expected. At first the Dollar weakened, but upon further review, the news that more jobs was created by the private sector helped turn the Dollar around. Traders are starting to believe that after being used as a safe haven currency for quite a long time, the Dollar may start to return to its traditional relationship with the economy.

The strength in the U.S. economy is helping to keep the pressure on the June Euro which is trading lower overnight. In addition, last week’s sell-off in Greek bonds indicates that Euro traders may be losing confidence in Greece’s ability to finance its debt and shore up its finances.

Optimistic traders are helping to underpin the June British Pound. Trader sentiment seems to be turning a little more positive for the British Pound after the U.K.’s 4Q GDP report showed a greater than expected improvement and the S&P Corp. left the country’s credit rating unchanged. Gains could be hampered by political uncertainty and concerns about the budget deficit.

The improving U.S. jobs picture helped pressure the June Japanese Yen. Traders drove this currency to its lowest level since August 2009. The strong possibility of an interest rate hike is making the U.S. markets a more attractive investment for Japanese investors. The Bank of Japan meets on April 6th. It is expected to keep interest rates low. In addition, officials may announce another stimulus plan to revive the economy.

The June Swiss Franc is trading flat to lower overnight. The weaker Euro is helping to weaken this currency versus the U.S. Dollar. The Swiss Franc has been under pressure since April 1 following reports of a major intervention by the Swiss National Bank. Continue to look for more intervention if the Swiss Franc continues to appreciate against the Euro.

Stronger demand for crude oil, firm gold and a bullish stock market is helping to boost the Canadian Dollar. Overnight the currency strengthened further, taking out the most recent swing top at .9938. The charts and upside momentum indicate that this market is well on its way to testing parity with the U.S. Dollar.

Today, investors will be looking to add to the strength in the Dollar because of the improving U.S. jobs picture. Gains could be limited because of light post-holiday volume, however. Traders will be watching today’s U.S. ISM Non-Manufacturing Index for direction. The consensus is calling for a 54 number. This means that the economic recovery is broadening from manufacturing to services. Pending Home Sales is expected to show a drop of 1%.

The key to today’s market will be whether global investors believe the U.S. Jobs Report is a good indication of where the economy is headed. Some feel that the pace of the growth is still too weak to warrant a stronger Dollar. Others feel the U.S. economy has turned an important corner and that the jobs outlook will only get better.

Copyright © 2010 James Hyerczyk
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