An odd jobs report sets the tone for what’s likely to be another choppy day in the markets – stock futures plunged, briefly, after the Labor Department said nonfarm payrolls grew by just 113,000, but the household survey saw a drop (again) in the unemployment rate to 6.6 percent on a big gain in jobs in that survey. An odd decline of 29,000 in government payrolls offset the overall about-at-trend-but-let’s-not-kid-ourselves-about-this-being-awesome 140,000 or so gains in the private jobs market, so there’s a little bit to like, some to shake one’s head at, and still more to wonder about how many people didn’t get to work because their feet froze to the ground when they tried to get into their cars.
It takes a lot to overshadow the heart of earnings season and a Federal Reserve meeting but the rout in emerging markets has managed to make that happen. This week is an important one. As my Reuters London colleague Mike Dolan pointed out, it will go a long way toward determining whether this is a rapid hot-money flight that gets stemmed after a brief correction or the start of a prolonged rout.
The contagion is building. Major world markets are taking it on the chin, U.S. stocks have slumped, and major asset managers in Europe are seeing shares fall, with some citing corporate exposure to emerging markets in general and Spanish exposure to Latin America in particular.
The parade of earnings releases continues Thursday, with bellwethers ranging from McDonald’s to Microsoft on tap. Discount airline Southwest was out before the bell, and Starbucks, Intuitive Surgical and Federated Investors are all due after the closing bell.
The week opened with the earnings of a number of high-profile corporate names that disappointed investors. Most notable of these was International Business Machines, which really ought to be called International Buyback Machines, given Big Blue’s penchant for driving earnings through financial engineering rather than, y’know, the real kind of engineering.
The first couple of weeks of the year have caused some investors to examine the hyper-bullishness that closed out 2013 – the most successful year for equity-market investing in more than 15 years. Still, a few weeks of softness this year didn’t stop the S&P 500 from hitting a new record Wednesday, however briefly.
Among the BRIC nations, Brazil’s the one that’s been repeatedly whacked with a brick in the last couple of years, seeing its currency depreciate and its stock market trashed as it steadily ratchets up interest rates to an expected 10.25 percent this evening (or perhaps even 10.50 percent).
This earnings season is front-loaded, per usual, with financial companies, which bring out the big guns this week (JP Morgan, Wells Fargo, American Express, Bank of America and Goldman Sachs), at a time when valuations are under a bit more scrutiny for a few reasons.
The dollar’s performance hasn’t been anything to write home about in the last few years. It has weakened against major currencies like the euro and the Swiss franc, and been held back by lower interest rates thanks to the Federal Reserve’s triple-dose of quantitative easing, but there’s been a turn of late, though it’s too early to say whether it will have lasting power.