Advisor Login Contact Us


I am firm believer in the comment to never over react to one single data release. I will make an exception. The chances of a rate hike by the Fed this year just fell exponentially given September’s labor report.
Payroll employment rose by a much weaker than expected 142,000 versus the consensus view of a 200,000 increase. August was revised lower to 136,000 from 173,000. Private sector jobs only increased by 118,000 in September and 100,000 in August, both either missing the mark or revised lower.
It gets uglier. The household survey measure of employment declined by 236,000. The only reason the unemployment rate remained unchanged at 5.1% is the labor force contracted by an even bigger 350,000. As a result the participation rate fell to a near 40 year low of 62.4% from 62.6%.
That is not the end of the bad news. Wages were unchanged and the average work week declined.
So is the US economy facing serious difficulty? Outside of manufacturing which has been killed by the stronger dollar, most other data points look positive. Initial claims are still below 300,000, job openings at a record, consumer confidence at the second highest level since 2007. Some have argued the slowdown in job creation occurred in the non-cyclical sectors such as education and health.
The FRB has stated many times change in monetary policy will be dependent upon the data, with jobs being a if not the primary determinate. This mono variable was perhaps tweaked three weeks ago with the inclusion of foreign markets into its formal deliberations.
After the data was released, equities sold off considerably only to rebound sharply into positive territory the result of a declining dollar that may support multinational profits, energy/commodities, and the belief that monetary policy may now not be altered until 2016.
Bloomberg reports the S & P 500 rebound from it morning 1.6% slide to its closing gain of 1.4% was the biggest since October 2011. I cynically ask how much of the volume and volatility is the result of HFT?
What will happen this week? Third quarter earnings season commences Thursday. How has the dollar and global woes impacted profits for the multinationals?
Also released is the ISM Non-manufacturing index which represents about 70% of the economy. Will this tier I indicator maintain its strength which is hovering its highest levels since 2005? Also released is the trade gap, inventories and Minutes from the September FOMC meeting.
Last night the foreign markets were up. London was up 2.18%, Paris up 3.44% and Frankfurt up 2.38%. China was up 0.48%, Japan up 1.58% Hang Sang up 1.62%.
The Dow should open moderately higher led by oil and commodities on speculation the Fed will delay raising interest rates. Is bad now good? The 10-year is down 4/32 to yield 2.01%.

Return To Index Page
Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.