It appears that the stock market has finally recovered from its New Year’s hangover. As I write this, the benchmark indices are up 1.7% on more positive news from the labor front. According to payroll processor ADP, U.S. businesses created 241,000 new jobs in December, above economists’ expectations of 226,000 jobs.
Today we got word that jobless claims—a measure of layoff activity—declined another 4,000 to a seasonally adjusted 294,000. This is the 17th week in a row that jobless claims have remained below 300,000—the generally accepted benchmark of normal economic activity. This is all good news for tomorrow’s big payroll report from the Labor Department; economists expect the unemployment rate to hold steady at 5.8% and for 240,000 new jobs.
Investors are also cheering yesterday’s release of the latest FOMC minutes, in which Fed officials indicated that they are unlikely to raise rates before April. This further supports the fact that we’re in a “Goldilocks economy.” The fact remains that stocks are being supported by the zero interest rate environment and moderate economic growth. But with the advent of High Frequency Trading (HFT) systems, sometimes the market needs the occasional reminder that the environment is much stronger than some would have you believe.
Speaking of which, we’re on the cusp of what’s shaping up to be a strong earnings season. As a follow-up to Tuesday’s blog, Micron Technology Inc. (MU) kicked things off on Tuesday evening with its fiscal first-quarter results, including 179% earnings growth and 13% sales growth. The stock pulled back yesterday on a weaker-than-expected guidance, but Micron is still looking great for the long haul. And sure enough, today the stock rebounded back to where it was before the earnings announcement. The stronger dollar will undoubtedly weigh on multinational companies’ bottom lines, but there are still plenty of buying opportunities to be had this earnings season.
I look forward to reporting on the latest earnings news in the coming weeks; in the meantime I’ll be in touch in tomorrow’s Stock of the Day and economic blog feature.