Good day! The market refused to let either the bulls or the bears take the lead in Thursday's session. After a strong rally on Wednesday, the indices were exhausted and needed a chance to catch their breath. The strong pace of the rally helped sustain the gains, but, as I noted in yesterday's column, the market was poised for a struggle even before the session began.
Dow Jones Industrial Average
The index futures began to pullback in premarket trade heading into Thursday morning. This correction was rapid compared to earlier upside, making it unlikely that the market would continue its uptrend. Instead, the market had entered corrective mode, and that bias remained intact throughout the day. The indices faced an increase in pressure when the government warned that if the federal debt limit was not raised, it could easily be reached by spring. If this were to happen, it would be the first time in history that the United States would default on its obligations. It seems unlikely that some measure will not be reached prior to that point, but the thought of it hanging overhead is greatly disconcerting. It also means that even with preventative measure enacted, the picture is still worrisome.
Most eyes heading into Friday morning were on the jobs report. Economists were expecting a rise of 175,000 non-farm payrolls in December and for the unemployment rate to edge lower to 9.7%. The index futures saw very little action ahead of the data and remained within the trading range set by Thursday's price action as the data was released.
Although fewer jobs were created than anticipated, leading to immediate selling on the news, the data's main surprise was unemployment. The unemployment rate fell to 9.4%. Despite this glimmer of hope, the market is still stuck within the larger 15 minute trading range with the opening bell in less than an hour away. The rapid pullback on the data following Thursday morning's premarket selling means that unless the futures bounce back quickly on the unemployment news then the overall pace bias is bearish heading into Friday's session.