Markets whipsawed by expected and actual data

Interest Rates:

The June U.S. Treasury bond closed at 147 26/32nds, up 1 and 15/32nds with yields posting the lowest rate in nearly four months. The weaker than expected jobs created report lent credence to our expectation of a slowing economy in the U.S. Once again the figure on Thursday of first time unemployment applications was up 28,000 to 385,000, an indication of "jobs lost" which the media fails to correlate with the "jobs created."

The significance of a weekly jobs lost figure against the monthly jobs created figure is completely overlooked by the media trying, in my opinion, to allay the fears of the investing public. It is not working…

Stock Indices:

The Dow Jones Industrials closed at 14,585.25, down 40,.86 but immediately after the jobs report the Dow sold off 175 points. The S&P 500 closed at 1,553.00 down 7.00 and the tech heavy Nasdaq closed at 3,204, down 21.00. The disappointment at the jobs created data showing 88,000 jobs in March against analyst expectations of 190,000 prompted the sharp negative reaction in equities. Discouraged workers left the workforce in record numbers and prompted the unemployment rate downtick from 7.7% to 7.6% — a number I feel is "meaningless." We continue to expect a sharp correction in the markets with a potential decline of 15%-20% and corresponding trillion dollar value loss. We strongly urge the implementation of hedging strategies for holders of large equity portfolios.

Currencies:

The June U.S. Dollar Index closed at 82.65, down 14.5 points tied to the disappointing U.S. economic data. The sharp rally in treasuries prompted the decline in yields, which detracts from dollar investment. However, even as we believe the U.S. economy is “faltering," relative to the problems we see in Europe and with our other trading partners, the U.S. economy is in better condition. Stay with the dollar. Other currencies gaining included the euro, up 59 points to $1.3003, the Swiss franc 63 points to $1.0714, and the British pound 98 points to $1.5328. Losses were posted for the Japanese yen against the dollar, closing at .10245, down 161, points, the Canadian dollar 46 points to .9821, and the Australian dollar 32 points to $1.0338. The Canadian dollar lost against the U.S. currency after it unexpectedly lost jobs by the most since the last recession four years ago. The Asian currencies fell the most since January as their policy makers proposed measures intended to weaken their exchange rates to improve their export picture. We continue to favor the U.S. dollar.

Energies:

May crude oil closed at $93.05 per barrel, down 21c tied to the weaker than expected U.S. March employment data showing jobs grew by only 88,000 against expectations for average estimates of 190,000 to 200,000 jobs. Crude oil as well as Heating oil and Gasoline declined since reduced jobs are not conducive to increased demand for energy products. We hold to our bearish expectations with an "eye" to the potential for hostilities from North Korea and the continuing concern over Iranian nuclear ambitions and the possible Israeli attack on those facilities.

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