The Markets

Just when it appeared things were beginning to settle down in the markets, a one-two punch was delivered to investors on the last trading day of the week. Friday's 323 point drop put it back under the psychologically significant 10,000 point level.

Why the cause for concern? What was the one-two punch? It was a combination of weak employment data combined with concerns about Hungary's debt.

431,000 jobs were added in May. While that may sound good, most of those jobs came from temporary census workers. Private sector employment only rose by 41,000. Private sector jobs are what analysts look at when determining the strength of recovery from the recession since they are usually sustainable and lead to an expansion of the recovery.

The jobless rate dipped to 9.7% from 9.9% but don't let that number fool you; workers who become disenfranchised and stop looking for work fall off the tally of those counted. Unemployment is much worse than the 9.7% quoted.
More concerns came out of Europe as Hungary's newly elected officials voiced concern over the country's debt levels. Vice President Lajos kosa said Hungary faces a sovereign-debt crisis similar to the situation in Greece. The Euro, which has been in a downward spiral broke below it's ten-year average of $1.20 settling in at $1.1966.
Where to focus?

The markets are looking for signs of improvement in the U.S. economic situation or continued growth in corporate earnings. Since we won't be seeing anything significantly reported on the earnings front until the middle of July (the beginning of second quarter earnings reports), the markets are focusing on domestic economic data as well as what's happening around the world. And right now, that information is urging caution.


While all markets have become more interconnected and interdependent on each other, the U.S. remains a very significant source of corporate profits. Concern over Europe will take a back seat to what happens here at home. The most important factor for our continued recovery will be in next quarter's earnings. That will tell if we are still on the road to recovery, or things are beginning to pull back.