tv First Business KICU January 4, 2013 4:00am-4:30am PST
traders and investors take a break from this week's buying spree to sell stocks ahead of today's jobs numbers. in today's cover story, why some believe the labor market is finally turning a corner. plus, a crop crisis repeat? farmers fear a drought and pullback on planting. and heavy metal - why traders are eyeing the gold market. first business starts now! you're watching first business: financial news, analysis, and today's investment ideas. good morning. it's friday, january 4th. i'm angela miles. in today's first look: it's a jobs friday. it's expected 150,000 jobs were added to payrolls last month and the unemployment rate remained unchanged at 7.7%. the stock market had a mild sell-off
yesterday after soaring wednesday on the fiscal cliff deal. treasury secretary timothy geithner reportedly will leave his position at the end of january. macy's is closing underperforming macy's and bloomingdales stores in california, maine, hawaii, texas, ohio, and the mall of america store in minnesota. and arctic rescue mission: the u.s. coast guard is still trying to free an oil drilling ship owned by shell that has been stuck off the coast of alaska since new year's eve. let's check in now with joe cusick of optionsexpress for his take on today's trading. what do you expect in the jobs trade today? > > you know angie, it is going to be very interesting. on the close yesterday, there was a very interesting trade: there was a large seller in the big s&p contract, about 4000 contracts traded on the close. so, a very interesting trade going into the number. potentially some hedging going
into the number, because we had mixed data yesterday with the adp number coming in better- than-expected but the claims data coming in worse-than- expected, a little bit higher. so, we could have some mixed action. looking forward to a potentially higher opening, but we are going to see. with that action yesterday, it has tempered a little bit of the enthusiasm in the last two days. > yesterday we got a glimpse of the fomc minutes, and it looks like the fed will be ending the bond buy-backs, the quantitative easing. what will that mean to the market, joe? > > you know what, it already put stress on the bonds. we saw that late-day. we saw the markets pull back a little bit on the reflections of those fomc notes. really angie, it is going to be hard to say what the impact is going to be right now, because bernanke has stood fast on the fact that they are going to keep rates at a level that is going to stay low until we start seeing that unemployment number get south of 6.5%. > where do you see sector
strength joe? > > right now we are seeing it in the global names. specifically we started seeing some positive data and some action in the chinese markets, in the metals: the copper, the steel. iron ore has hit highs. i would be a little bit tempered on the iron ores, but looking at those global stocks, they are the ones that are going to be looked at quite a lot in the first quarter of this year. > thanks joe. that is joe cusick of optionsexpress. > > thanks. there were a lot fewer layoffs at the end of the year than came at the end of 2011. outplacement firm challenger, gray and christmas reports that december saw the second fewest layoffs of any month last year. but whether hiring is about to turn the corner still depends on whom you ask and in what sector of the economy. not only were there fewer layoffs in december across the u.s. than in ten other months of 2012, the entire year had the fewest layoffs in the last 12 years. but that doesn't necessarily mean we've hit bottom. "it may be that employers decided that there was no pressure to cut jobs." a drop in layoffs doesn't
necessarily mean hiring is about to begin, either. the fiscal cliff talks postponed spending cuts for two months and left the debt-ceiling situation unresolved. "the big spending cuts didn't occur. we just don't know where those are at yet." and then there's the cost of obamacare. in some places, small companies are said to be preparing to downsize to get under the 50-employee cut-off. "companies just aren't taking chances. they're worried the economy will turn south. they're willing to stand pat rather than hire any time soon." sectors with the fewest layoffs include construction, retail, electronics, industrial goods, healthcare and government - the last two, healthcare and government, partly due to the ramping-up of obamacare. "they are hiring to create a cost-savings program for government to improve cost- efficiency. they hope to achieve a $400-million savings
for an $80-million cost." for the year, the biggest reasons for layoffs were tied to company restructuring and closing of facilities. the deep political divide over whether to raise the debt ceiling is the next issue out of washington that could stall out business on wall street. republicans are vowing to use the debt ceiling vote as leverage in an attempt to get severe cuts on federal spending and entitlement programs. president obama has said he has no plans to negotiate the debt
limit with congress, leaving america back on the brink. juli neimann of smith moore and company is on the line with us with some thoughts on that. good morning. what will that mean for money managers? "this should be nothing more than a procedural vote, and if they don't go along with it and pull the stunt that they did in 2011, this really could throw the debt market into a problem. the big problem is the federal reserve is completely out of ammunition, so we are looking at a situation where if they are not in there supporting interest rates, you are going to see the market react and probably react badly. so investors and advisors could be in a rising interest rate environment before it really is due." thanks, juli. from new jersey northward, there's plenty of people hoping the newly-elected members of the house respond to disaster relief better than their outgoing predecessors. members
of the 113th congress were sworn in thursday, a day after house majority leader john boehner put off a floor vote on $60 million approved by the senate to help the northeast recover from superstorm sandy, the most destructive storm of 2012. today, however, the new congress is expected to vote on $9 million for immediate aid, with the $51-million balance scheduled for a vote january 15th. consumers' fears of falling off the fiscal cliff along with deep discounts are expected to hurt 4th quarter profits for several major retailers. jc penney, target and khol's all warned 4th quarter earnings may come in below expectations because of larger-than-expected markdowns. meanwhile, for the month of december, major retail chains collectively posted a 4.5% increase in sales for the month, which was higher than analysts' expectations of 3.3%. costco was the top performer, wtih a 9% bump in sales. nordstrom reported an 8.6% rise, while ross stores and tj max sales were up 6%.
automakers were in high gear last year with over 14 million in sales. 2013 was the strongest year since before the recession, with the big three automakers all gaining ground in december. chrysler topped the list with a 10% rise in sales, while gm's grew nearly 5%. ford's 2% rise was the narrowest, but still its best year since 2006. meanwhile, toyota's december auto sales were up 9%. consumer demand for cars is revving up for 2013. analysts expect sales to climb over 15 million. farmers are thinking twice before planting this year's crops as the threat of another year of drought is in the forecast. jack scoville of price futures group joins us with with more. jack? "there hasn't been a whole lot of change in the drought pattern. given the cost it takes to raise crops, the fertilizers alone - nat gas or petroleum-based - those are going to cost you some money. and the seeds, especially these
high-bred seeds and the gmo seeds these producers tend to use, are very expensive seeds, so you are going to want to make sure you have a decent chance of growing a good crop. and if there is any concern at all, instead of going fence post to fence post, pull back for a more normal rotation." thanks for the update jack. hormel foods is adding skippy peanut butter to its menu with a $700-million buy from unilever. hormel, which is best known for spam lunchmeat, hopes the deal will spread its expansion into china. skippy is the number two peanut butter brand in the u.s., with annual sales of $370 million. about $100 million in sales come from outside the u.s. gap is mixing up its fashion sense. the popular retailer is paying $130 million in cash for highly fashionable intermix stores. intermix, which is based in new york, sells
clothing from designers including yves staint-laurent and givency as well as lower priced wear. the deal benefits gap with a wider reach on the internet as well as international name recognition. it's a win for google against regulators. the ftc ended its probe into google, confirming it did not violate antitrust statutes. it claims google is justified to favor its own products in search results. but microsoft isn't satisfied. the company claims google refuses to distribute youtube "metadata" - or videos, favorites and ratings - to its mobile competitors. transocean will pay a $1.4- billion fine for the massive 2010 oil spill in the gulf of mexico. transocean was the owner of the deepwaterhorizon drilling rig leased by bp. the rig exploded and sank, killing 11 workers and leaking 5 million barrels of oil into the sea. still to come, it's traders
with the congressional crisis forstalled with this week's fiscal cliff deal, are america's small business owners relieved? are they more optimistic? every month surepayroll canvasses its 10s of thousands of members and puts out the small business scorecard. michael alter is president and ceo of surepayroll. michael, these numbers that just came out are for december, pre-fiscal cliff deal. let me ask you, now that the deal has been made, at least for taxes, do you think small business owners are relieved and optimistic? > > i think they are absolutely relieved, because there is a lot more money in the pockets of consumers, or at least there will be going forward, than what would have happened in the fiscal cliff situation. so, i think they are relieved in the short-term that there is more money that will be spent on main street, and maybe we can see some more growth this year, and hopefully more growth than we have seen in 2012.
> now with the sequestration, the debt limit ceiling that has to be raised and negotiated, those things hanging unresolved, how does that play with small businesses? > > that is the second part of your question, are they optimistic? and i don't think they are as optimistic over the long-term, because i think they are concerned that we don't have a long-term fix for a lot of the challenges that we face right now: those things in terms of the second sequestration, which could reduce certainly spending, will be a big challenge for them, as well as some of the longer-term issues with the deficit. > let's take a look back at your just-released december numbers for small business owners. let's talk about hiring and payroll. what is the change there? > > month-over-month we saw the actual number of folks on the payroll fall - just a little bit, 0.1%. but we saw the average paycheck rise 0.1%. so, i think that that really shows you an economy in stagnation, where small businesses out there are really frozen, and they were waiting to see what happened
with the fiscal cliff - when we went over it, how we responded to it. so i think in january we will start to see a little bit of hiring coming into the new year with more certainty around at least what the tax rules are going to be going forward. > but because of that optimism damper that you were just talking about, it is not going to be gangbusters in hiring or raises? > > no, i would not expect to see dramatic growth. i think you are going to be more looking more at 2 to 3% as opposed to some significant increase. > how about the optimism number for december? what did that look like? > > the optimism number for december was 55%, so, one in two - and glass is half full, glass is half empty. i think that is a very low number among small-business owners. traditionally small businesses are glass-half-full folks. they tend to be 85%, 90% in good times, optimistic about the future. so, one-in-two is not a great number, and that means not a lot of jobs being created. > > and with the congressional deal just resolved, you're not thinking there is going to be a big jump in that either for january. > > i would assume it will go up, but i don't see it back to the 80-90% levels we would like to see in a growth economy. > michael alter from surepayroll. thanks so much. > > thanks for having me. thank you bill. traders unplugged is just around the corner. stick around as our traders debate... is the rally getting old?
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♪ and it's beautiful the teflon stock market tops today's traders unplugged. joining us with their views from the floor of cme group, pro traders alan knuckman and andrew keene. good to have you back on the show. round 1) long in the tooth? - the us market has been in a 45- month rally from lows. what stops the uptrend? > > i've got two words: momentum and bond bubble. and i think a lot of money is starting
to come out of the bond market, because they realize they can't take those yields, they're missing a huge opportunity. > > i have two words then as well: bernanke and budget. bernanke is going to put the brakes on, possibly stop buying bonds. i think there's going to be a rush out of equities. also, i think they're going to have a budget problem. i don't think it is going to be a problem for the next four to six weeks, but look at the end of february, early march, we might have another fiscal cliff situation. > > so you're picking a top in the market that's gone straight up and now the ftse in london has gone up for 20 months- > > it's overbought. > > the nikkei has gone up for 20 months- > > it's overbought > > the world is recovering, things are getting better, and now you're saying the top is in- > > it's overbought. 1460, we have tested twice, and it's sold off- > > overbought is relative. we're going to 1570 and then 1600. > round 2) the sunny side trade - warren buffet spent $2.5 billion for a solar company. is this industry legit? what stocks would you buy? > > legit in terms of, yes, the solar stocks are going higher. i know how much higher they can
go. look at first solar, it went from $11 to $37. a 50% short in terms of stock getting squeezed go higher and higher. a lot of these solar stocks have huge short interest. they are going higher. there is a huge shift out of wind in the u.k. and in china, into solar. > > i'm conventional. we sell oil market trade in a two-month range and now has broken out above $93, targeting near $100 now. i am looking at a natural gas play: chk is trading at $17. it has been trading in a rage now, so it looks like the near-term target- > > it's going lower though. > > is $24. exploration is where it's at. we need more energy because the world is expanding, and so is the economic base. > > solar. solar. > round 3) real? estate - a new york property recently sold for $88 million. is the housing crisis over? would you pick a stock in the housing sector, or is it done? > > my stock is home depot. i don't really like retail, the bricks-and-mortars, but you look at something like home depot, that is the only place that i can't go on amazon prime and actually buy something. i
actually have to go to the store, i have to measure, i have to decide what i want at the retail store, so i like home depot. with sandy as well, i think a lot of people are going to be purchasing stuff for their homes. > > toll brothers and home builders are a bit overdone. we saw that stock go up 50%. but the ceo says that he is looking for home prices to go up 20% in 2013, and 25% in 2014. > > maybe in manhattan. > > so there is a lot of potential. i think the back- door way is to go through wells fargo. i think the mortgage crisis situation, where people can't get mortgages, is going to get solved, and wells fargo is in a position to really take advantage. > > wells fargo is my no. 1 bank. i think they have the least european exposure, they have the most to the u.s. housing debt. that's a good bank, that's my no. 1 bank for 2013. > > the target is about 30% higher. looking for it to get to 48 if it breaks above 36. > on to the bonus round question of the day: when was the last time crude oil dipped below $50 per barrel? > > high crude oil is a sign of economic strength, so you go ahead sir. > > age before beauty. > > it's 2009. > > '08. 2008. > it's 2008. thanks for being on the show. we will be right back. matt cavanaugh of cmz trading
joins us now for chart talk. good morning to you. gold futures sold off by $25 yesterday. what does that tell you, and what triggered the sell-off? > > i think that gold has had a really good start to the year. it is up in the beginning part of this year after the fiscal cliff was settled. that took care of the revenue side, but really none of the spending side. yesterday it sold off a little bit on profit-taking, a little bit on a strong adp report. then in the afternoon when the fed minutes came out, we really saw that second leg of selling come down. so, i think there is just a little bit of data driving it and a little bit of supply and demand. > how would you play gold through the gld, which is much more cost-effective for a lot of people? > > well, i continue to see a lot of strength at the $160 mark for gld. i think what we saw is a little bit of a knee-
jerk reaction to people thinking, "hey, the fed might be wrapping up their bond-buying program a little bit earlier than expected. they might not support the so-called hard assets as much as we thought." but i really think that that was more of a knee-jerk reaction. anything that you can do to play this $160 support - maybe sell a put spread, keep a tight stop so you don't get washed out if there is a big move, but you are still able to participate - i think any time you get close to the $160 mark, you have to try to go long and see what happens. > how long are we going matt? will we see a major rally that could take it back to... maybe $10 higher, $20 higher? what do you see in the cards? > > i think the fundamentals absolutely continue to say that gold should go higher. now we have got some looming concerns a little bit further out, and that is can the u.s. get its spending under control? can we shore up our budget deficit? is the fed going to unwind their balance sheet? but really, i think any sort of symbol there is going to come up much further down the line. we are not going to have anything that is really going to cause gold to sell off, unless it is some major market event, and we really don't want to get washed out in the meantime. > thanks matt. have a good weekend. > > thank you. it's time to wrap it up for today. coming up monday: change is in the air for the travel industry. we will have the inside scoop on how to get great deals on savvy travel in 2013. as we fly out of here for today, all of us at first business wish you a restful weekend.