Market Reaction Muted to Disappointing Jobs Data

NEW YORK (TheStreet) -- We heard this morning that the U.S added 74,000 jobs in December, well below estimates for almost 200,000 and last month's upwardly revised 241,000. And, while the unemployment rate dropped to 6.7%, below economist estimates, this was largely due to the continued reduction in the labor force, with the participation rate dropping to 62.8%. Many have pointed to this data point being an outlier, particularly given weather issues and its stark contrast with stronger economic data we have received, including Institute for Supply Management (ISM) numbers and Gross Domestic Product (GDP). But there is no doubt that today's number was disappointing, reminding us how key it is that back in December, Federal Reserve Chairman Ben Bernanke's announcement that the Fed will start to cut back on its bond purchases at a rate of $10 billion per month is data-dependent. And, the decision to keep interest rates at current record low levels for a longer period, with a 6.5% unemployment rate as merely a benchmark figure, is also key.

Just before Christmas, on CNBC's Closing Bell, I talked about key areas of the economy that are beneficiaries of taper, including industrial stocks like Honeywell (HON) and financials like Citigroup (C) and U.S. Bancorp (USB). Take a look at the link here:

 

I still think these groups are well positioned longer-term, and while we may see a shorter term rotation away from these names reacting to the weaker unemployment number and worries that taper will lessen, individual company earnings, along with more robust economic data, should turn the tide. If anything, there is likely risk to the upside when it comes to taper.

Growth names that are defensively positioned, amidst an uneven recovery, are strong areas for this environment with much upside that remains ahead. These include the large cap biotechnology stocks like Celgene (CELG), Biogen (BIIB), Gilead (GILD), and Regeneron (REGN) that Jim Cramer has talked about consistently on Mad Money. The JP Morgan Healthcare Conference next week in San Francisco could provide more data that could move these names.

Also dominating news in the last couple of days has been markedly muted retail data. I noted in a segment just before the New Year on CNBC's Street Signs that 2014 will be, even more than 2013, a stock picker's market-- with a real focus on fundamentals. Here's a link to the portion of that clip. As I said yesterday, retail is a sector of haves and have-nots, with negative news from Sears (SHLD) leaving it in the do-not-buy camp while Target's (TGT) data breach woes could provide a buying opportunity. The defense of high-end, aspirational brands, though, remains strong, with strong holiday numbers out of Tiffany's  (TIF) today. We continue to track the high-end consumer via the Gatsby Index which I outlined last year in this 'Inside the Madness' column.

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