Blame it on the Weather
Today’s Spotlight Market
Wednesday?s disappointing employment report from ADP appears to have done little to sway analysts and traders expectations for the February non-farm payrolls report. 163,000 new jobs were expected to be created in February, which would be a recovery from the anemic 113,000 jobs reported for January.? The unemployment rate is expected to remain steady at 6.6%. Traders may wish to look behind the headline figures and focus on the details of the report, in particular on which employment sectors showed the greatest gains or losses in employment as well as the direction of the monthly revisions to the previous two months of employment data. This can be a clue to whether the actual employment trend is improving or slowing.?? ?
Fundamentals
February was apparently a cruel month for job seekers as U.S. employers were slow to add to payrolls last month. Private sector employers added 139,000 new jobs in February according to a report compiled by Automatic Data Processing (ADP) and Moody’s Analytics. This was lower than the pre-report forecast of 160,000 new jobs created.? Small firms added the largest number of new workers last month at 59,000 jobs created.? Service sector jobs rose by 120,000, but the all important manufacturing industry added a scant 1,000 jobs in February. Among the reasons cited for the slow employment growth the past few months was the harsh winter weather experienced in vast swaths of the country.
Apparently, the Federal Reserve is not too concerned about the weak employment data of late, as there appears to be little talk of the Fed slowing down its recent tapering of bond purchases. Harsh winter weather was also cited as a major factor for a drop in the ISM nonmanufacturing Index in February.? The index fell to 51.6 vs. 54.0 in January, with many respondents noting that winter weather conditions were a factor in subdued business activity. There was some good news on the employment front with weekly jobless claims falling by a larger than expected 26,000 to a seasonally adjusted 323,000 for the week ending March 1st.
Traders will now turn their attention to this morning?s highly anticipated non-farm payrolls report, with analysts lowering their expectations once again for the number of new jobs created due to bad winter weather. However, one must wonder what will be the market?s reaction should the employment picture not improve significantly in the coming months, without the ?weather? as a ?scapegoat? for a slowing employment recovery.?? ?
Technical Notes? -? View Today’s Chart
One of the markets where participants take a key interest in the employment data is that for U.S. Treasuries. So taking a look at the weekly continuation chart for 10-year Note futures, we notice prices trading within the consolidation pattern established following the steep price decline back in June of last year.? Prices are above the 20-day moving average (MA), but remain below the widely watched 200-day MA. The 14-week RSI is neutral to weak with a current reading of 42.45. Support is found at 122-07, with resistance seen at 128-02.?
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