U.S. Equities Pause With Upward Bias Before ECB, Bank Of England, FOMC Meeting And July 2012 Employment Data:
Equities paused today briefly with a slight upward bias (at 3:15 pm EST) after rallying significantly last week while the U.S. 20 year note dropped . This week is filled with central bank headline risk based on the ECB, Bank of England and the FOMC meeting news that could come out. On Friday, the all-important July 2012 unemployment report will be released and most economists aren’t expecting much growth. The unemployment rate hasn’t budged below 8 percent but even a marginal change in jobs growth could bring the rate down slightly and the labor participation rate isn’t expected to improve much.
We are closely watching the financials as well as the euro to see if the rally will continue. Expect more headlines related to additional central bank easing and new approaches to handling the crisis in Europe. We are expecting an additional 75,000 jobs this month +-25,000. A retest of recent market lows after another rally early this week would be positive for the market medium run. The Fed could also move on QE3 or signal further that it’s ready and willing to use its tools to improve the sluggish U.S. economy that is now growing below trend. Expect sharp weakness in stocks if the ECB, Bank of England and Fed don’t make/signal strong moves.