While the Dow has seen more volatility on a daily basis the overall weekly market levels have been relatively stable. Last Wednesday when all major indexes were heavily in the red, Congress agreed on a short-term debt compromise and the Dow promptly shot from being down 400 to closing up 200 while the S&P 500 and the NASDAQ made similar moves. Today the Dow closed at 34,496 down 249 after being up 200 points up earlier. Trading volume was higher and indications that institutional investors are taking gains continues. IBD lists markets as being in a correction. This week, 3rd quarter earnings reports will begin hitting news wires and gurus are calling for a 29% increase in overall earnings however worries persist over the effects of labor shortages and supply chain disruptions.
The Economy and Earnings
The labor report for September came out last Friday and revealed that labor supply shortages and covid constraints continue to burden the economic recovery. The Labor Department report showed the unemployment rate falling to 4.8% from 5.1%, which was better than expected but the non-farm payrolls only rose 194,000 versus guru estimates calling for an increase of 500,000. September is a month is which hiring picks up in what is known as the “back to school bump” but hiring at local education jobs did not materialize for some unknown reason. The civilian labor force is still down about 3 million workers compared to prepandemic levels and the labor force participation rate ticked down a tenth of a point to 61.6%. With enhanced Federal unemployment benefits phasing out, the labor shortage is now seen as a result of people retiring early or not wanting to work because of covid exposure coupled with workers realizing they have pricing power and holding out for a better job. Either way the labor shortage is acute. At several local Dick’s Hamburger joints, they now close at 8 pm instead of 2 am because they don’t have the staff to cover the late-night shift.
Despite the weak jobs report, oil prices went over $81 per barrel as demand clashed with global supply chain and labor issues. The 10-year treasury yield also rose to 1.61% and gurus are thinking the Fed is still on track to begin cutting back on bond purchases as inflation will offset concerns over a weak labor market.
Items of Interest
The scout trip scheduled for this weekend was canceled due to lack of interest. Bummer! These kids gave up a chance to be miserable. I am currently in the process of setting up a winter hike for February. Let’s hope for snow.