BAD JOB REPORT HURTS STOCKS...INTEL PULLS SOX DOWN...JAPAN HITS 20-YEAR LOW
NIKKEI BREAKS SUPPORT... The Nikkei fell 225 points today (-2.7%) to break support that's existed since last October. That puts the Japanese stock market at the lowest level in twenty years. We've commented before on the close correlation between the Japanese market and U.S. interest rates. The reason is simple -- deflationary trends starting in Japan and spreading throughout the globe. Yesterday, we showed the 10-year T-note challenging its October low. Chart 2 shows that benchmark is down again this morning -- owing to a very weak jobs report. Charts 3 and 4 show how closely linked the Japanese market has been to U.S. bond yields. That's another reason why today's breakdown in Japan is important -- especially if it means lower U.S. rates. That's bad for U.S. stocks because it reflects the market's view of a weakening economy.
Chart 1
Chart 2
Chart 3
Chart 4
GOOD PRODUCTIVITY -- BUT NO JOBS... The WSJ reported on yesterday's news that "U.S. productivity growth topped estimates in the fourth quarter". Today we learn that the January job loss was the worst in fifteen months. And, the unemployment rate rose to 5.8%. The number of jobs lost was 308,000. That loss was four times the worst estimate of economists surveyed by Bloomberg. The average forecast was for a gain of 10,000. Yesterday economists were delighted by the gains in productivity; today they're shocked by the drop in jobs. We've pointed out before that gains in productivity come from firing workers. I'm still waiting for some economist to explain how firing workers can be good for the economy.
INTEL DISAPPOINTS... A disappointing report on Intel last evening has pushed that influential stock down sharply this morning. The daily chart shows its price gapping back under its 50-day moving average. Intel is the biggest loser in the Dow, and is the primary cause of this morning's loss in the Nasdaq. The drop in Intel is also pulling down the SOX Index, which is suffering the biggest loss in the tech sector.
Chart 5
Chart 6
NBR TONIGHT... Just another reminder that I'll be on the Nightly Business Report this evening at approximately 6:45 pm (NYT). The show starts at 6:30 pm and runs for half an hour. In my view, it's one of the best business shows on TV.
