Daily Clueless Musings 7/08--Nonfarm payroll

After a strong ADP number and retail sales yesterday, hope is high for today's Nonfarm payroll. Everything about the June employment report was a major disappointment. There is nothing positive in this report. Nonfarm employment increased a pathetic 18k, after a downward-revised 25k increase in May. Bulls can no long blame the earthquake, flood and storm. Japanese PMI bounced nicely in June, however manufacturing employment rose by just 6k, after declining 2k in May. The average workweek fell a tenth to 34.3 hours and average hourly earnings declined 0.04%. The declining consumer income does not bode well for spending. The unemployment rate increased 0.1 to 9.2% in spite of the participation rate falling to 64.1%. Futures jumped higher, as market was caught by surprise. Vols were soft. Gamma options are lower after the number, but bounce back slightly as futures continue to move. It is interesting to see how the CPI and PPI print next week. Although the headline inflation might be lower due to lower gas prices, core might continue to trend higher, merely as function of easy year over year comparison. Eurodollar futures rallied toward their highs and 2 year dropped to 38 basis points. Stocks were surprisingly resilient, they ended higher than the pre-ADP level.