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Weekly Recap

David Becker
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A softer than expected ISM Manufacturing report was the first data point of the month and its relative weakness generated a downward cascade for equity prices. The end of the week saw a turn in price action as better than expected economic data help buoy both equity bourses and riskier currencies. Oil prices remained buoyed as stronger than expected heating demand in the United States boosted the value of heating fuels, while earnings continued to generate significant price action for some well-known companies.

On Monday, the ISM released a weaker than expected manufacturing report. January manufacturing slumped to a reading of 51.3, its lowest reading since May, though still indicating an expansion of activity. The metric missed a projected 56 and marked a drop from December’s 56.5. Price action continues to trade defensively until Wednesday when the services number was released.

According to the Institute of Supply Management their Services headline index rose to 54.0 from December’s 53.0 reading. Economists were looking for a smaller advance to 53.7. The all-important employment sub-component advanced to 56.4 from 55.6. The figures suggest that overall business activity in America’s services sector, which accounts for roughly 80% of the economy, accelerated more than expected in January, as did hiring in the sector.

Also on Wednesday, Automatic Data Processing and Macro Advisors released their private non-farm payroll report. According to ADP private payrolls increased by 175,000 in January compared to the 189,000 expected by economists. The biggest gain came in the service sector which increased by 160,000. The goods sectors increased by 16,000, while small business increases increased by 75,000. Revisions were a non-event which calls into question the governments December report.

On Thursday, the Department of Labor reported weekly initial unemployment claims. Jobless claims decreased by 20,000 to 331,000 in the week ended February 1, 2014. That was slightly lower than the 335,000 forecast by economists and reversed most of the prior week’s gain.

The week was anchored by the government employment report which printed at reading that was very disappointing. The BLS reported that 113,000 jobs were created which was weaker than the 189,000 expected by economists. Traders initially were able to pass on the soft report as a weather event. The colder than normal temperatures as well as, the nasty ice and snow storms, likely eroded job creation. The unemployment rate printed at 6.6% which was in line with expectations.

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