The economy probably slowed in the third quarter and employers hired fewer workers in October, economists project reports to show this week. Growth in consumer spending, the biggest part of the economy, was probably the weakest since 2011. Payrolls rose by 125,000 workers last month after a 148,000 gain in September, Labor Department figures may show Friday. The advance estimate for Q3 U.S. GDP arrives on Thursday morning.
Equities: The DEC13 E-mini S&P 500 (CME:ESZ13) is up 5.5 points to 1760.50, in a subdued trade to start this data-heavy week. One of our key targets of 1770 has been reached, so we believe the market will be really waiting until the end of the week to make any significant moves. We believe the market is still vulnerable to ‘taper-talk,’ and this could easily be fueled on Thursday and/or Friday if the numbers come out much higher than expected. Overall, the trend in stocks this year has clearly been bullish. We see 1750 as a key longer term line in the sand. If the market dives below this level, we look for the 1725 area as a first target. As of now however, the market does seem like even at these levels above 1750, it has an upward bias. BUT, the data later this week will give much more insight as to where the market may head next. The thing that has scared the market the most this year has been talk of tapering the QE stimulus. Thus, following that trend, if the jobs number comes out much higher than expected, we may see the markets head lower because of concerns of a December or early 2014 taper.
Bonds: The DEC13 U.S. 30-year bond futures (CBOT:ZBZ13) are up 13 ticks to 134’05. The area of 133’20 has served to be a very important pivot point for this market over the past couple of months. We believe the overall trend for the bonds is still down, and would not be surprised to see this market trading several points lower six months from now. The bonds as well will likely have a big reaction later this week to the GDP and payrolls data, especially if either of the data come out much higher or lower than expected. We think the bonds are more likely to make a 6 point move lower to 2013 lows than a 6 point rally to the 140 area.
Currencies: The DEC13 U.S. Dollar Index (NYBOT:DXZ13) has pulled back a bit from recent highs at 81, but could rally above and beyond that level mainly depending on the data this week. The DEC13 Aussie is very strong this morning, trading 67 ticks higher to 94.76. The DEC13 New Zealand dollar is also strong, trading up 54 ticks to 82.60. We are watching the Yen closely. The DEC13 Yen is up 16 ticks to 101.43. We would not be surprised to see the Yen at some point test the lows of 2013 and possibly head much lower than that.
Commodities: Gold has found some buying near the $1,300 level, with DEC13 gold (COMEX:GCZ13) trading up $5 to $1,318. We have key resistance at around $1,335. This is our line in the sand for the gold market. Again, we believe the data later this week might have a big impact on gold. Natural gas has been very weak recently, with the DEC13 contract (NYMEX:NGZ13) trading lower by $.08 to $3.43. The overall energy complex is weak today, with DEC13 WTI crude oil (NYMEX:CLZ13) dipping to $94.06, but bouncing a bit higher after that, now trading at $94.62. DEC13 Heating oil and DEC13 RBOB are also down today. Our key levels for crude oil below here are $92.75 and then $92.