The unemployment rate ticked down a bit, but some of that was due to how they calculate the labor force. And we are still a ways away from the 6.5% unemployment rate that the Fed has cited it would like to see to take its foot off of the monetary policy accelerator.
There was also a pretty strong reaction in the 10-year yield, which ticked up to 2.08% on Friday. With an improving economy one would normally expect yields to creep higher. But these are not "normal" times, and with the Fed trying to keep rates down its hard to see what the natural level is that we could see the 10-year trade towards. Currently, the 10-year yield is flattish near 2.05%.
There hasn't been much in the way of market moving corporate or economic data this morning, leaving investors to take their early cues from overnight action. Asian markets ended mixed overnight with Japan slightly higher and China a bit lower.
China's CPI rose 3.2% yr/yr, a bit hotter than expected, but the PPI fell -1.6% yr/yr. Industrial production increased 9.9% and retail sales rose 12.3%. Both of those figures were below expectations causing some concern about slowing economic growth. There were rumors that one Asian brokerage firm lowered its GDP forecasts for 2013.
Europe's markets are mostly lower today also due to disappointing data. French industrial production declined -1.2% vs. an expected gain. Italian GDP was left unchanged from the last reading at -0.9%. Portugal's Q4 GDP contracted 1.8%. And Swiss retail sales were also below consensus at 1.9%.
Despite the flattish market this morning, the volatility index (VIX) has fallen all the way back to 12.15. Hard to believe we are back at the 12 level so quickly after touching 19 a couple of weeks ago. But there doesn't seem to be much fear in the market today. Of course, the last time we got down to these levels we saw a pretty sharp selloff in stocks, albeit it brief.
Trading comment: The stairstep market continues and the slow grind higher hasn't offered many great buying opportunities unless you moved quickly to take advantage of the 1-2 day pullbacks. We continue to trim those stocks that have really had big runs in recent weeks, like some of the consumer staple stocks, while looking to put cash to work in stocks offering fresh breakouts from consolidations. Some may be tempted to look for stocks that have been lagging in this market in hopes of them playing catch up. But that type of investing hasn't worked well for us in the past. We prefer to focus on stocks that are market leaders. The one exception would be AAPL, which we continue to hold in hopes that it will soon reverse its recent downtrend but so far has been disappointing.
KAM Advisors has long positions in AAPL
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