Friday's Brew - Dec 8

Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful. Stock futures were higher after the all important jobs report this morning, but consumer sentiment weakness has cooled investor sentiment.

Nonfarm payrolls showed an increase of 132,000 jobs for November, however, once again revisions to the prior month's numbers are worth noting as well. Nonfarm payroll additions for October have been revised lower to 79,000, from 92,000 previously reported. The first release of this data has proven quite unreliable, so we believe markets will grow less and less sensitive to this release over time, and pay more attention to the prior month's revisions. That said, September's numbers were revised higher.

Unemployment rose to 4.5% from 4.4% last month, but average hourly earnings appreciated only 0.2%, and if unemployment is rising and job growth is slowing (assuming revision to November), then wage pressure should ease off of inflation. We view today's information neutral, as the revision to job growth in October and rise in unemployment offset the positive impact of light wage growth. We will keep a close eye on just how fast unemployment increases and how deep it portends to get, as with the state of consumer debt, we do not believe there is much room before the economy is driven into recession.

OVERSEAS MARKETS

Asian markets were decidedly lower Friday, with mainland Chinese issues down roughly 3-4%across indices. The Hang Seng Index fell 0.55% as official media suggested the government may raise borrowing costs again, after raising rates twice this year already.

Japan's NIKKEI 225 Index slipped 0.34%, while India's indices all fell over 1%. Two days ago, Pakistan offered a new idea regarding India's disputed Kashmir region, proposing independence for the Indian territory. Clearly, this is not a welcomed proposal in India, and the prospect of an intensified movement for independence and the disruption that would likely occur within the greater of India, helped to pressure the market.

Markets across the pond were broadly lower through midday Friday, as the prospect of a restrictive Chinese central bank and weak consumer sentiment data out of the U.S., led to a reversal following the U.S. jobs news driven rally. The DJ STOXX 50 PR was down roughly 0.23%.

ECONOMIC DATA & NEWS

Friday keys the economic data release this week, with the November Nonfarm Payroll report and unemployment data. Bloomberg's consensus saw nonfarm payrolls indicating growth of 105,000, compared to growth of 92,000 (revised to 79,000) in October. Actual nonfarm payroll growth measured 132,000 (so far), and was interpreted positively by the market. November unemployment came in as expected, measuring 4.5%, versus 4.4% in October.

The University of Michigan released its December consumer sentiment reading, which measured 90.2, below the consensus view of 92.0 and under November's reading of 92.1. The reading still measures well above the average of 88.1 since 1978, but the directional change is what is concerning markets today, and rightly so. The American consumer drives GDP here, and if unemployment is rising, consumers are overburdened by debt, and sentiment is falling, then GDP could recess.

COMMODITY MARKETS

Crude oil is marching higher today, up roughly 1.3% to $63.30 per barrel, as signs point toward an OPEC production cut at next week's meeting in Nigeria. OPEC President Edmund Daukoru indicated that he is uncomfortable with current pricing. We continue to believe the current reduction in production is allowing Saudi Arabia to build inventory secretly, in order to insure supply in the event of conflict between Iran and the United States or Israel.

Gold has steadied and is up 0.5% today, as the dollar's brief bit of strength has stalled. Also, pressure seems to be intensifying on Iran, as France has indicated that sanctions must be applied soon. It is clear that Russia and China will not comply, and Israel has sent its foreign minister to the White House, we believe to voice its displeasure. It may be that Israel could move sooner rather than later, if Washington cannot assure it of progress. We believe that Europe will agree to sanction Iran on its own, but that before long, Israel with or without the assistance of the U.S., will move on Iran's nuclear facilities.

STOCKS IN THE NEWS

Vital Signs is the appropriately named only company reporting earnings on Friday. McDonald's (MCD) posted a November same-store sales rise of 6.2% globally and 5.1% within the U.S. MCD shares were up approximately 1% in morning trading. We hope you enjoyed "Today's Morning Coffee" and we wish you a good day trading. (disclosure)