The Day Ahead: Treading Lightly Around the Jobs Report

 | Jun 07, 2013 | 8:00 AM EDT  | Comments
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The moments just before an employment report are rife with anxiety. There is the constant refreshing of the Bureau of Labor Statistics website, last-minute clients calls and emails, as well as a brewing Twitter competition to share the best statistics and screen-grabbed charts. More often than not, I might have a general feel for how the market will react initially, and then on Monday, and then in the weeks that follow #NFP mania. With that sixth sense for these massaged government-sourced numbers, I may not mind being a little risky with a couple fresh recommendations into the report.

However, this time around I followed the playbook I spelled out Monday and took it easy. Throughout the week, my focus was on capital preservation and on watching the market react to key macroeconomic data. I have no sense for what the market's response will ultimately be, and that is something I find disturbing. It stinks when you are so close to the markets on a daily basis, and yet are mentally frozen -- though I have to admit that, in the past, my cautious tendencies have won out when compared with those times I tried to force a recommendation or call.

So here's a "thank you" to the Federal Reserve governors for creating massive confusion in a market that was once free as a bird.

With all that said, here are a few things on my radar screen that should be on yours as well.

• A number of retail names announced May sales, and the stocks reacted negatively to the numbers, even despite haircuts in these shares weeks earlier. Of particular worry are retailers TJX (TJX) and Ross Stores (ROST), shares of which have failed to find traction even in a safe-haven trading environment. Also concerning is that Dollar General (DG) received modest buying interest after a large, deserved, earnings-related rout.

• I'm unsure as to where I nabbed this statistic, but the average S&P 500 stock is down 4.34% since the May 22 peak.

• The money that has flowed from emerging-market equities has certainly not found its way to domestic stocks. That's a red flag.

• The Philadelphia Semiconductor Index (SOX) has traded in virtual lockstep with the S&P 500 so far this year, and this week chip stocks have acted a bit more horribly than the SOX would indicate. I am looking for the SOX to stabilize and turn higher. That would begin to dispel the idea of a growth slowdown from higher interest rates in the second and third quarters. Such a move would also get me comfortable with fresh calls in the sector.

• Yes, most leading stocks I track have held at their 50-day moving averages. However, the trading volume has been far from convincing. The employment report has obviously loomed large, but pay attention to how your winners are trading around areas of support.

Target Is Overvalued, I Think

On Thursday I came out negative on Target (TGT) over at my firm. Here are a few bits and pieces from that note.

First, in my chat with Target executives, I was disappointed in the commentary on CityTarget. "Sales were in line with expectations" was the quote. The discussion revealed that the company is in "learning mode," and they are "tweaking" the stores. Both of these temper my enthusiasm on CityTarget as a something that could be a material tailwind in comparable-store sales and profit in the medium term.

Target (TGT) -- Same-Store Sales

Source: Belus Capital Advisors

Second, even considering unfriendly weather conditions in the fiscal first quarter, the fact is that food sales and customer traffic moderated sequentially. Target also seemed to give a nod to an impending ramp in price investments. I read this as market-share loss, especially when looking at a comp trend that peaked in the fourth quarter of 2011.

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