Stock Market Finds Bad News Okay

(Stocks in this article: Nasdaq: COST, NYSE: BJ, Nasdaq: YHOO, NYSE: TWX, NYSE: CHS, NYSE: SKS, Nasdaq: AAPL, Nasdaq: AMAT, NYSE: LF)

When not so bad news becomes good news, does that mean it's time to buy the stock market? Like Hillary Clinton, the market found joy in news today that was not as bad as was expected. But, will that still be considered a good thing tomorrow? That all depends on the next catalyst.

Economic Data & Analysis

Employment Data

We got a bad poker hand this morning in the pair of employment reports that reached the wire to start the day. The ADP Employment Report offered indications of recession's progression. According to ADP, national private sector nonfarm employment declined 23,000 in February, down from a revised lower increase in January. Implying that a broader group of employers are now wary of recession or already experiencing business slowing, businesses from large to now medium sized are appropriately altering hiring patterns.

Large businesses have been on the forefront of recession watch, and continued so this past month as they cut 34,000 jobs. Large businesses are by definition more sophisticated and shareholder driven, and thus likely have a higher level of pressure to maximize efficiency. But, the bad news seems to have leaked out to the rest of the employment market. This month, medium sized organizations, or those of 40 to 499 employees, shed 4,000 jobs in February. According to ADP, this marked the first such decline since June of 2003, when the economy was just exiting hard times.

Small businesses increased jobs by just 15,000 this time around, but we expect smaller businesses to follow the rest of the pack as economic difficulties further pervade the economy. Manufacturing also continued as the lead loser, shedding another 40,000 jobs in February. The migration of manufacturing jobs leaves us extremely concerned. This marked the 18th consecutive month of job loss in the manufacturing sector.

As jobs go away to foreign lands, those who were employed within the lost positions remain here. There are only so many service sector jobs available, and even high technology jobs are finding their way overseas now. Thus, unemployment seems certain to follow a longer term trend higher, and pressure to limit immigration seems sure to intensify as well. The service sector added 47,000 jobs, while the overall goods producing sector, including manufacturing, lost 70,000. It's clear that pressuring cheating trading partners into fostering a fair playing field is of high priority, and all candidates for the presidency should be considering how to maintain capitalistic ideals while still insuring fair trade.

Challenger, Gray & Christmas Job-Cut Report

This report, which measures planned layoffs at corporations, came in at 72,091 in February. This compared with announced layoffs of 74,986 in January and 44,416 in December. Remember, firms first freeze new hiring before moving to more drastic cost controls involving layoffs and asset sales. For this reason, ADP and the Labor Department Report on Friday offer better insight into economic deterioration, and the extent of it.

The Challenger report perhaps showed the beginning of something we've been warning about for sometime. The retail sector cut 6,918 jobs. As consumers decrease spending, the retail sector will find itself saturated. Consolidation must follow, leading to increased unemployment and a rise in vacancies. Commercial construction must suffer as a result of all this, and while this is now common concern, we told you it would happen long ago.

Now that it is happening, we're not too happy about it. Where will the employees go? What jobs will they find? The Internet might offer some of these displaced an opportunity for entrepreneurship, and thank God for that. Might we see migration out of the United States? There's an interesting thought. Could Americans leave the country in search of employment opportunities elsewhere. Yes.

ISM Non-Manufacturing Index

The Institute for Supply Management offered February's Non-Manufacturing Index today. At 49.3, it surpassed consensus expectations for 47.5. The Business Activity Index measured 50.8, uplifting news, and just in time. Still, when "uplifting" comes in the form of economic contraction, should we not be worried? Another important report, Factory Orders came in down 2.5% in January, as weak as was expected. Should we be enthused by this as well?

When not so bad news becomes good news, it could be a sign of exhausted sellers. However, that does not necessarily mean buyers will drive prices now. In fact, sellers could find a second wind first. There's an opportunity for new catalyst now, on the long or short side of the table.

Thank you. (disclosure)