Get ready for a flood of U.S. economic data tomorrow, June 4.
U.S. stock markets opened ahead this morning on positive economic numbers and, more importantly, on anticipation that tomorrow’s numbers will clearly show that growth in the United States remains on track.
This morning’s ADP report on private sector employment showed a gain of 55,000 jobs in May. That was the fourth straight month for job gains. Initial claims for unemployment, also released this morning by the Department of Labor, fell by 10,000 last week to 453,000. The four-week moving average of initial claims climbed, however by 1,750 to 459,000. That was the third increase in the moving average in the last three weeks.
The big numbers, the ones that can really move the stock market, come out tomorrow, Friday, however.
At 8:30 ET, before the New York Stock Exchange opens, the government will release its numbers on jobs, unemployment, hours worked, and average hourly wages. Economists and investors will be searching for signs that the U.S. economic recovery is on track or confirmation of worries that growth is faltering.
Right now, according to Briefing.com, the consensus among economists calls for a 500,000 gain in jobs for May. That would be a huge increase from the 295,000 jobs added by the economy in April. The April number was itself the biggest increase in jobs since March 2006.
An increase of 500,000 jobs would be enough to actually send the unemployment rate slightly lower even as an improving economy brings more discouraged workers back into the labor force. Economists are looking for the unemployment rate to drop to 9.8% from 9.9%. They probably wouldn’t be terribly surprised, however, if the unemployment rate held steady or even ticked up. The pace with which discouraged workers re-enter the work force is very tough to predict.
Hourly earnings are expected to glow slightly—by 0.1%. This number was flat in April.
And hours worked is predicted to rise to 34.2 per week from 34.1 in April.
None of these numbers would signal an especially robust recovery but they would be enough to cement the U.S. stock market’s rank as the best performing in the world in 2010. The U.S. economy doesn’t have to be perfect. Just better.
Ed, your thoughts are very much appreciated as always. I will certainly be checking out your recommendations …
cjxland, I went for ASML, as recommended by Jim, couple of days ago: manufacturing in euros, selling in dollars, leading technology.
Ed
Hey- we have no secrets here! On the other hand, maybe that would be just a bit of an “overshare”, as my little niece would say, and a bit Off Topic too… ;]
You are correct: cherry picking season is probably a little later on this summer, August say or September, maybe, when the E-zone and Sino-bears [do you suppose they are pandas?]get a little longer in the tooth. [Jim has written recently about both.] But as you may have been able to discern, I like my cherries with lots of sugar [divs], so they keep a long, long time: I did pick [up] some SNY a couple days ago.
hailog,
Yes, DRR is an ETN.
As for the difference between ETF’s and ETN’s, the simplest answer is in how they are structured. ETF’s usually have some form of underlying asset which determines their value, whereas an ETN’s underlying value is based on a bank-issued note which is valued on an asset (which the bank holds). If the bank that issues the note upon which the ETN is valued should default, then the ETN is worthless.
For a more thorough description of ETF’s and ETN’s, the Wiki entries for both are good places to start.
Don’t forget the gigantic impact temporary cencus hiring does to the jobs number out tomorrow. May is the highest month for temporary hiring and most of the temp jobs are lost in June and July. You cannot look at a number of 500k new jobs and thinks it’s great without discounting the 1-2 months of temp work the census offers. Real employment (non-government-temp employment) will be much worse than 500K… if that is the headline number.
cjxland,
At least you didn’t ask me “boxers or briefs”…
Seriously, be careful picking those European cherries. If you do, try to find something with a low beta.
trader,
On EPV, the SMA 50 is about to cross the SMA 200. Granted, it did drop below resistance, but we’ll see how it finishes the week.
Having said that, I should add that my position in EPV is light (I have 4 times as much in my two euro shorts combined). If EPV does drop, I can still add more later to adjust my cost basis downward. On the other hand, if the European markets crash anytime soon, I won’t need to.
As for upside, it’s at $25.77 now. The 52 week high was $43.54. I’d call that some significant upside (although I’m not necessarily betting on it).
Mr Vann,
I recommend the screener on the following website for finding ETF’s:
http://etfdb.com/etfdb-category/leveraged-equities/sortfield/PCCHYTD/sortdir/D/
As for which ETF’s to buy, I usually look for the opportunities first, then go looking to see if there is an appropriate ETF for playing that opportunity.
Generally speaking, ETF’s can be judged by two factors (outside of their underlying investments/assets): expense ratio and volume. A lower expense ratio means you get more of the profits, whereas a higher volume makes it a safer play (although not necessarily safe, as you have to consider the underlying investments/assets to fully consider whether it is truly safe).
To use the euro shorting strategy as an example, DRR has a lower expense ratio, but EUO has more volume. That’s why I own both.
Changed yer shorts today, Ed??
[sorry- just couldn’t control the urge…]
Full disclosure: Europe is looking mighty good to me at the moment. Some cherries there to be picked!
Ed, agree with your comments regarding Europe. My technicals don’t look good on EPV, at least in the short term. Looks like most of the upside is come and gone. You’re thoughts for buying at this time?
I meant DRR* not DVV sorry
Ed,
Along the same lines, DVV is an ETN, right? Is there any subtle difference between buying and trading an ETN short as opposed to an ETF short?
As always, appreciate you sharing your insights.
Ed,
I am a newbie when it comes to “shorts”. I did add EUO to short the EURO. Could I talk you into sharing any good resources, specific inverse ETFs, and philosophies you have when it comes to shorting stocks, specific market segments and the like?
One thing I’ve learned in our current market: The only thing you can be sure of is that Europe sucks. I moved out of my market shorts yesterday and added DRR (euro short) and EPV (Europe stock short).
Jim,
Lots of speculation on the job market tomorrow.
Also a wild card with BP possibly (not holding my breath) can seal the leak. I think we need that to get some solid footing.
Also I think some people are having to file for unemployment because of problems with the oil spill. We are hiring clean up workers but it is putting other business out.
We can expect “improvement” in the job market at best. Forget about robust job creation we once had. The foundation breeding for such robust job creation has been removed.
Drum roll, please!!