Highlights of the Prior Week

Macro

The monthly non farms jobs report hit on Friday and was a monster. The report  showed 321,000 new jobs with the headline (U3) unemployment rate holding steady at 5.8% while the broader U6 moved down one tick to 11.4%. Oddly the labor force participation rate remained at a 36 year low of 62.8%.

The blowout jobs number was not enough to move the needle for domestic equities which were generally up a little. The Dow Jones Industrial Average was up 0.73% for the week, the S&P 500 up 0.38% and the Russell 2000 added 0.78%, with only the NASDAQ finishing in the red, down 0.23%.

Running down the foreign markets, the seven equity markets we regularly follow were all higher, led by Shanghai's shocking 9.51% rally, most of which occurred on Thursday. The Hang Seng added just 20 basis points while Japan was better by 2.64% and Australia rose by 1.1%. In Europe the Dax was up by 1.06%, the CAC 40 went up 74 basis points and 0.30% for the FTSE 100.

In our weekly deflation watch the German bund yield actually went up last week to 0.78%, the French OAT went back above 1% to 1.03%, Spain's yield though continued to drop, down to 1.83% and Italy breached 2% now yielding 1.98%. These numbers compare to the US, which moved higher in yield to close the week above 2.30%.

Last week we looked at the selloff in the crude market and explored the idea of exhausted sellers or capitulation. While it is too early to know whether sellers truly are spent, they did take a breather last week as crude had a very bumpy ride to a 1.44% gain for the week. Gold also rallied on the week by 3.63%.

Energy stocks, as measured by large cap-dominated sector funds, managed to eek out small gains as well last week; but for the most part these ETFs are down mid to high single digits. Of course, smaller companies more leveraged to the various shale formations are down far more; this method of extraction usually has a relatively high breakeven level.