The S&P 500 just had its best January since 1987! That's a tough act to follow, which helps explain a little bit of the sluggishness in the futures market this morning, as market participants question just how much longer this hot run off the December 24 low (+15.0%) can last.
Yesterday, the market had a somewhat unstoppable feeling to it, which is perhaps an early indication (based on a contrarian viewpoint) that the rally is about to stop.
If nothing else, it will be slowed at today's open. The S&P futures are up two points and are trading 0.2% above fair value. The Nasdaq 100 futures are down 27 points and are trading 0.3% below fair value. The Dow Jones Industrial Average futures are up 68 points and are trading 0.4% above fair value, aided by better than expected earnings results from ExxonMobil (XOM) and Chevron (CVX).
A 4.3% decline in shares of Amazon.com (AMZN), though, following its earnings report, which was accompanied by some conservative-minded first quarter revenue guidance, and a set of weak manufacturing PMI readings out of China, South Korea, Germany, and Italy, have created some cover to take some money off the table.
The same can't necessarily be said for the January employment report. It provided another reminder that the U.S. labor market remained strong in the face of market volatility, the partial government shutdown, and a growing sense of cautiousness about the global economic outlook.
It's worth noting that employment is a lagging indicator, yet the leading indicator of initial claims still corroborates the view that there hasn't been any meaningful break in the labor market amid the heightened degree of uncertainty permeating the market landscape.
There is a lot to take in with the January employment, including annual benchmark revisions, the effect of the partial government shutdown on the results for the Household Survey, and a rising labor force participation rate that speaks well of the growing confidence in finding a job.
The key takeaway from this report is that, even with revisions that reduced total job gains in November and December by 70,000, job gains have averaged a solid 241,000 per month over the last three months, offering some data-based justification to think this economic expansion has more room to run with consumer spending providing support.
Other notable headlines from the Employment Situation Report are as follows:
- January nonfarm payrolls increased by 304,000 (Briefing.com consensus 160,000). Over the past three months, job gains have averaged 241,000 per month
- December nonfarm payrolls revised to 222,000 from 312,000
- November nonfarm payrolls revised to 196,000 from 176,000
- January private sector payrolls increased by 296,000 (Briefing.com consensus 160,000)
- December private sector payrolls revised to 206,000 from 301,000
- November private sector payrolls revised to 200,000 from 173,000
- January unemployment rate was 4.0% (Briefing.com consensus 3.9%) versus 3.9% in December
- Persons unemployed for 27 weeks or more accounted for 19.3% of the unemployed versus 20.5% in December
- The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 8.1% versus 7.6% in December
- January average hourly earnings were up 0.1% (Briefing.com consensus +0.2%), after increasing 0.4% in December
- Over the last 12 months, average hourly earnings have risen 3.2%, versus 3.3% for the 12 months ending in December
- The average workweek in January was 34.5 hours (Briefing.com consensus 34.4), unchanged from December
- Manufacturing workweek decreased by 0.1 hour to 40.8 hours
- Factory overtime decreased by 0.1 hour to 3.5 hours
- The labor force participation rate was 63.2% in January versus 63.1% in December