Russell flat to up after jobs miss "whisper" numbers

Kevin Pendley | Jul 03, 2008 8:57am EDT | Comment

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Small-cap stocks are expected to open flat to higher this morning, apparently breathing a sigh of relief that the monthly jobs report was not as bad as feared. Although the employment report and weekly claims data seems troubling at face value, the U.S. dollar actually rallied right after the numbers were released, and stock index futures came into a knee-jerk bid because the “whisper” numbers for jobs were far worse than the actual data.

The monthly employment report headline figure came out at minus 62,000, which was slightly above the median forecast of 60,000. However the unemployment rate remained at 5.5%, which was a tad worse than the forecast for a dip to 5.4%. In addition, the weekly claims figure was at 404,000, well above expectations.

On Wednesday, the ADP National Employment Report came in at minus 79,000, which was the worst monthly showing since November 2002, and perhaps braced investors for a weak showing on today’s report. There were some calculations based on ADP’s report that the jobs figure would swell above minus 100,000. Although the market focus will remain on the jobs reaction through the shortened trading session, investors will get a chance to react to the ISM Non-Manufacturing Survey at 10:00 a.m. ET. The stock market closes early today ahead of Friday’s Independence holiday.

While most of the attention is on jobs, it’s hard to ignore the fact that crude oil prices soared to new record highs above $145 overnight, which could keep a lid on investor hopes for a bottom.

Before the jobs data came out, tech stocks were down 0.5% overnight, while broad market index products were flat. Tech stocks were pulled down by chip maker NVIDIA Corp. (Nasdaq:NVDA), whose shares tumbled some 28% overnight on news that the firm was lowering its outlook.

In overseas action, stocks were primarily lower, catching up with the rout in U.S. markets from Wednesday. India shares were down 4.1%, South Korea off 1%, Australia down 1.8%, Singapore down 0.8%, Hong Kong down 2.1% and Japan down 0.1%. China stocks were up 2.2% and Taiwan was up 0.5%.

Ahead of the U.S. stock market open, the ECB raised rates 25 bps, becoming the first central bank policy group to hike rates since the credit crisis erupted through the markets, sending worldwide equity markets reeling. Interestingly, the dollar actually firmed just a tad against the euro right after the rate hike, perhaps because of a case of “buy the rumor, sell the fact” since the ECB did not go for a more aggressive 50 bps of tightening.

The chart picture remains bleak, with very little noteworthy support until the Russell gets down to 668. Below there, support is at 660, then 650. Meanwhile, resistance is at 683 and 689 if the market starts to rally ahead of the holiday weekend.