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Market Roller Coaster Takes Dow Up 600+ Points

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Wednesday, March 4, 2020

Pre-markets are way up this morning, following a drop of around 3% in the major U.S. indexes yesterday. This followed Monday’s single-highest-point trading day in Dow Jones history, up nearly 1300… and this came after Friday’s plunge that saw the single-worst trading day, point-wise, since the early months of the Great Recession more than a decade ago.

Currently, the Dow is moving more than 600 points up, the Nasdaq +170 and the S&P 500 +60. Usually we don’t ride roller coasters in the wintertime, but there’s nothing usual about these days.

New private-sector payrolls for February have been reported ahead of today’s opening bell, with the monthly release from Automatic Data Processing (ADP - Free Report) ahead of the tape. A headline figure of 183K new jobs was higher than the roughly 160K expected, further pushing the narrative that the U.S. labor market remains robust and stable as it has for, literally, years. Yet there are several caveats worth pointing out in this data…

First of all, the revision to January’s headline was significant, coming down from the 291K originally reported to 209K today. This is reportedly based on a new model being used for recording private-sector jobs gains, so we do not expect these types of 80K+ corrections month over month going forward.

But in the breakdown by industry, we see Education/Healthcare lead the way, as per normal, with 46K new jobs filled last month, and second place going to Leisure/Hospitality at 44K. However, with what we know about how tactics for dealing with coronavirus fears are materializing, no one thinks the Leisure/Hospitality industry is going to grow anywhere near these levels going forward.

For Manufacturing, which lost 4000 jobs in February, coronavirus fears have not yet manifest in these numbers. The surveys were based on mid-month totals; coronavirus was a known entity at the time but was not being considered a pandemic at the time.

Thus, once coronavirus considerations are entered into private-sector job creation in the near future, not just Marketing and Leisure/Hospitality, but all sorts of economic segments are expected to be deeply affected. Economist Mark Zandi, on CNBC’s “Squawk Box” this morning, chalked up job losses in Manufacturing to an overhang of the U.S.-China trade war. He expects “weaker jobs numbers — it’s just a matter of time.”

Friday’s non-farm payroll estimates from the U.S. Bureau of Labor Statistics (BLS) currently stand at around 175K new jobs created. This is down from the previous month’s excellent 225K new jobs and the 261K from November 2019. Contrast this with the year-ago February BLS totals of a mere 1000 new jobs created. That’s quite a range to fall into.

The roller coaster ride continues. To ease your anxieties and quiet any motion sickness you may be encountering, follow the Zacks Rank and Value-Growth-Momentum grades for stocks and ETFs you may be interested in obtaining.

Mark Vickery
Senior Editor

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