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Once Again, ADP Report Shows No Correlation With Monthly Jobs Data

 September 02, 2011 11:50 AM

The market is lower in early trading on the heels of a very disappointing monthly jobs report. The nonfarm payrolls data showed that the economy added zero jobs in August. That is well below both the consensus figures (70k) as well as the whisper numbers going around yesterday.

Additionally, private payrolls only increased by 17,000, far less than the 110,000 that had been expected. And the unemployment rate remained elevated at 9.1%. Today's report was another indication that the ADP report that comes out two days before the NFP report has not bee a good leading indicator.

Asian markets were lower overnight, and Europe markets were down this morning amid weakness in the banking sector. Our banks are also sharply lower today after news reports that the FHFA is going to sue some large banks over mortgage-related matters.

The dollar is higher today, which is weighing on most commodities. Oil prices are down to $86.50, and ag prices are lower also. Gold and silver are both higher, benefiting from the flight-to-safety trade, with gold prices back up to $1875.

The 10-year yield is dropping again, back down to 2.06%. Last time down, we saw the 2.0% level hold. As for the VIX, it is up +5% currently to 33.35.

Trading comment: The last 2 sessions validate why I wanted to remain cautious. The volatility we have seen has not left the market, although I hope it peaked in August. But we have not heard any concrete solutions out of Europe, and recent economic data has not been all that great either. I would be surprised if we retested the August lows so quickly. Rather, I expect September to bring choppy trading, but one where traders might be able to buy into support levels and sell into resistance. For investors, my advice is to remain cautious and defensive.
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