INVESTORS WILL GET A CHANCE TO BETTER DIGEST THE JOBS REPORT THIS WEEK, WITH A CLOSE EYE ON THE FINANCIALS

11/04/2007

By Dave Harris

Wall Street will enter the coming week with an opportunity to digest the better than expected jobs report for October. On Friday, jobs grew by 166,000. The unemployment rate stayed even at 4.7 percent. It didn't do much for stocks though because investors were still caught up in the belief that the Fed is done cutting rates for a while, in my view. With oil prices at $95.93 a barrel and a weakening dollar, that increases inflation concerns. That means the Fed is less likely to cut, in theory. But I think the Fed is just saying they won't be pushed around, and the state of the economy is the main concern and not the financial markets. Meanwhile, they have been cutting rates and that says enough. Don't be fooled, the central bank will still protect the financial markets. So this week we may see further upside in equities as investors take a closer look at the jobs report, and put interest rate concerns on the back burner.

Last week ended mostly mixed, with the Dow Jones Industrials 211.60 points lower at 13,595.10. The Broader S&P 500 fell 25.63 to 1,509.65. The techs are still leading the pack with the NASDAQ rising 6.19 to 2810.38.

I am overweight tech, and still maintain a "don't buy" rating on the financials such as Goldman Sachs (GS), Merrill Lynch (MER) and Citigroup (C). I think the mortgage exposure and credit crunch issues make these stocks a little dicey at this time. Stan O'Neal the chief exec at Merrill just resigned. The company lost over 2 billion in the third quarter and had huge write-downs because of the subprime mortgage mess. Merrill closed near its 52 week low Friday, down 4.91 at $57.28 per share. As of this writing, Citigroup is expected to hold an emergency Sunday board meeting and it's speculated that CEO Charles Prince may step down. That stock was down .78 cents to 37.73, also near its 52 week low of 36.52. It will be interesting to see how the financials perform this week.

Economic data for the week ahead is fairly light and should do little to move the markets given the nature of the reports. The services report from the ISM comes Monday. A reading on labor productivity is Wednesday and initial jobless claims on Thursday. A preliminary reading on consumer sentiment form the University of Michigan and the trade balance report is on Friday.

Earnings season is winding down, but some companies of note report this week. Cisco (CSC) the network tech company, News Corp (NWS) and insurer American International Group (AIG) report Wednesday. On Thursday it's Ford (F), home builder Toll Brothers (TOL) and Walt Disney (DIS).