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by Peter Switzer

It’s going to be very hard for stocks to resist gravity today after a worse than expected jobs number raised doubts over the ability of the US economy to resist a severe slowdown or even a recession. That said, the weakness of selloff on Wall Street shows there are many investors or traders who aren’t committed sellers but are playing the waiting game on the basis that they don’t want to miss the big rally when it starts.

For the record, the Dow was down 124.2 points or 0.96 per cent to 12,772.47 after the June jobs report showed only 80,000 new positions turned up instead of the 90,000 expected. By the way, 90,000 is not a good number for the USA — 300,000 would be great but 200,000 would be well received by markets. We’re a long way from those levels.

Better news needed

What we need is some better than expected news and possibly with the new company-reporting season starting this week, that’s where it could come from. That’s more of a hope than a strong view, as it has been a weak quarter for US, Chinese and European growth, and so if American companies do OK, that could be a big market plus. If they don’t, it could send stocks down.

The big issue globally was the easing of interest rates by the Bank of England, the ECB and the People’s Bank of China. Also Christine Lagarde, the woman who replaced the bed-hopping Dominique Strauss-Kahn as the boss of the IMF, didn’t help matters by talking about a global slowdown in developed and emerging economies. Thank you Christine for contributing the bleeding obvious to an already worrying picture.

But to keep this into perspective, Jan Hatzius, the chief economist as Goldman Sachs, isn’t seeing a recession in the numbers at this point.

“It’s not a recessionary data point, but it is a data point that is clearly showing the economy is growing at a below trend pace,” Hatzius told CNBC. “It’s certainly not enough to absorb people back into the workforce and over time it’s probably consistent with slight deterioration in the labor market.”

What’s ahead?

So what are the big issues for this week that could turn us positive or negative?

Overseas Alcoa reports — the first Wall Street company to show and tell, there are FOMC minutes from the Federal Reserve, consumer sentiment and JP Morgan reports. There is also a pile of economic data out on Friday, which could be important to markets.

On the local front we get the latest NAB business survey where we see how confident business is, consumer confidence, housing finance and the latest job numbers.

We have about three months of important economic and market data ahead, which will determine the direction of stocks. They could go either way, but right now the bets are being placed on the basis that good news could just nudge out bad news — just!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Monday, July 09, 2012

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