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Daily Agenda: Markets Look for Further

Improvement in U.S. Job Data
06 FEB 2015 ANDREW BARBER

Expectations were running high for another strong showing in the latest U.S.
employment data, and the U.S. Department of Labor did not disappoint. Nonfarm
payrolls rose by 257,000 jobs in the U.S. in January, beating analysts' forecast for a
230,000 increase. The unemployment rate ticked up to 5.7 percent, from 5.6 percent in
December, but any concern was more than offset by the upward revisions in the
number of jobs created in November and December. While there is no question that
the overall jobs situation in the U.S. is continuing to improve, investors have shifted
focus, however. With the question now when, rather than if, the Federal Open Market
Committee will begin tightening, the quality rather than the pace of job creation is
taking precedence in market sentiment. Hourly earnings, which are expected to
rebound by 0.3 percent after a surprise decline in December, are likely to take the
analyst spotlight. In December the participation rate contracted to 62.7 percent,
keeping the level near record lows and supporting concerns that job recovery remains
fragile. With U.S. financial assets continuing to set the pace for global markets battered
by macroeconomic concerns, todays data will reverberate well beyond Treasury
markets.
Greek pols announce commitment antiausterity campaign promises. After a
whirlwind tour of European capitals, newly installed Greek Prime Minister Alexis
Tsipras and Finance minister Yanis Varoufakis are back in Athens and have vowed
publicly to stick to pledges to end austerity measures, regardless of any dissent from
within European Union ranks. In response, the next Eurogroup meeting has been
pushed ahead to February 11. Most analysts anticipate that the meeting will result in a
confirmation of the hardline policy favored by German leaders, as the EU seeks to
avoid setting a precedent for other members still recovering from recession.

Fed predicts uptick in consumer credit numbers. Federal Reserve consumer credit
estimates for December are forecast to rise by $15.2 billion with nonrevolving debt
consisting mainly of automotive and student loans expected to lead the charge once
again. In November revolving credit, most of which is credit card debt, contracted for
the second consecutive month.
German factory activity shows slight slump. Industrial production data for Germany
in December registered slightly weaker than expected, at 0.1 percent monthover
month. Despite coming in softer than consensus estimates, a revision to November
data has created four consecutive positive readings for the measure for the first time
since 2011.
U.K. trade deficit widens more than expected. U.K. trade data released today
revealed a total annual deficit for 2014 of 34 billion ($52.1 billion), a fouryear high, as
exports disappointed in December.
Portfolio Perspective: The Bullish Signals Overlooked in the Stock Market
Nicholas Ragone, Villicus Capital Group
To say the stock market has been volatile the past two months is a huge
understatement. The bears are screaming that a steep correction is imminent,
considering the bull market is nearly six years old the fourth longest in history.
Regardless of the uncertainties stemming from freefalling oil prices, the Federal
Reserve ending quantitative easing, the Greek crisis and so on, the only thing that ever
matters is price.
The S&P 500 has been a source of concern since October after a shortlived visit
below the 200day moving average. While everyone hyperfocuses on oil prices and
negative news, the midcap S&P 400 index soared to a new zenith Thursday. The S&P
500, Nasdaq and small caps are just a few points from scoring new highs. This doesnt
happen in weak markets. Sentiment indicators show investors are a far cry from the
exuberance typically seen at market tops.
Nicholas Ragone is a managing member and portfolio manager at Villicus Capital
Group, an alternative investment management firm in Melville, New York.