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Market Update

Will Good Friday Jobs Release Be Kind to Stocks?

March 30, 2015

Put another quarter in the books. As Q1 wraps this week, new job market data and end-of-quarter position-squaring are likely to drive market action, although abbreviated by the holiday.

Equity markets will close late in the week to observe Good Friday, but it’s lights on for government agencies. That means the jobs report—always potentially market-moving—still hits that morning. Bond traders and index futures markets will get the first stab at reacting to whatever nuggets (or lumps of coal) the March payrolls report offers.

The average number of monthly payroll gains over the past 12 months has been 266,000. The consensus forecast for March is a slightly softer 255,000, while the unemployment rate is expected to remain at 5.5% (see the full economic schedule in figure 4).

The report hits amid rough market action. After rallying 5.5% in February to recover losses suffered in January, the S&P 500 (SPX) dropped 3.1% in the first two weeks of March. It then recovered most of that loss by March 20 before falling 2.3% last week. Whew! That’s a lot of up-and-down action for the first three months of the year.

Calm or Masked Emotions?

Yet, despite the wild ride, some measures of risk perceptions remained subdued last week. For instance, the CBOE Volatility Index (VIX) lost 0.73 point to 15.07 last Friday and while the “fear gauge” is up 12% since the end of February (see figure 1), it’s still down year to date.


The CBOE Volatility Index (VIX), which tracks the implied volatility priced into short-term options on the S&P 500, is down 22% for the year . Its moves are lagging those seen in the SPX. Data source: CBOE. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

A similar volatility trend extends across much of the equities market. For example, the CBOE NASDAQ-100 Volatility Index (VXN) is up 15% for March and the Dow-tracking CBOE DJIA Volatility Index (VXD) climbed 13% this month. Still, for the year, most measures of implied volatility are lower, including small-cap shares, emerging markets, and gold (see figure 2).  

FIGURE 2: MARCH VOLATILITY SNAPS BACK. Most measures of volatility show substantial gains in March, but not enough to erase year-to-date declines. Data source: CBOE. For illustrative purposes only. Past performance does not guarantee future results.

One reason for the drop in implied volatility year to date is the choppy trading seen in Q1. Although the SPX has had a fair share of ups and downs, it’s essentially flat for 2015. Looking below the surface, however, there are clear winners and losers. For instance, health care and consumer cyclical names have outperformed, but losses in financials, energy, and utilities have offset those gains.

The three-month TD Ameritrade Trade Architect Heat Map reflects the mixed market action during Q1 (figure 3). There seems to be a nearly equal amount of green and red squares representing stocks moving higher or lower. Bottom line, there hasn’t been enough definitive action to totally flip the mood in the stock market. Will that change in the coming days?

FIGURE 3: PATCHWORK PERFORMANCE. The three-month heat map shows a mixed performance across stock sectors. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Earnings Prelude

In the lead-up to Friday’s jobs report, manufacturing numbers are due out from U.S. and overseas sources. Reports on consumer confidence and industrial production factor into the equation midweek. 

And of course, Friday’s jobs report might give investors plenty to think about over the weekend if the results are either too hot or too cold. Recall March 6, when the S&P 500 shed nearly 30 points after a strong jobs report stoked concerns about aggressive interest rate hikes.

Meanwhile, a very light earnings calendar includes reports from chemicals company Monsanto (MON) on Wednesday and memory-chip maker Micron (MU) Thursday. Soon, however, focus will be back on corporate profits. The reporting season gets in full swing in just a few weeks. Given the weakness in energy prices, the strength in the dollar, and tepid economic data, investors will scrutinize the results for a sense of how corporate America feels about the remainder of 2015.

For that reason, if any bellwethers offer soggy guidance or profit warnings, the commentary could potentially trigger some pre-earnings jitters and choppy trading in the days ahead.

There’s more. Don’t count out the global news element either. The Greek government may submit a comprehensive list of proposed reforms by Monday in order to secure more bailout funds. The aim of meeting this deadline would be to speed up the disbursement of money from the schedule agreed on in February, when the European Commission, European Central Bank, and the International Monetary Fund granted a four-month extension of the existing bailout agreement, Bloomberg reports. 

No shortage of news potential as we look to the charts, too. In the SPX, look for support at 2051 and resistance at 2072 and 2100.

Good trading,

FIGURE 4: ECONOMIC AGENDA. This week’s U.S. economic report calendar. Source:

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