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DOW – 120 = 17,419
SPX – 16 = 2083
NAS – 83 = 5056
10 YR YLD – .03 = 2.23%
OIL – .31 = 44.84
GOLD + 5.00 = 1090.50
SILV + .06 = 14.76

Jobless claims rose by 3,000 to 270,000 in the week ended August 1. Firings are at historically low levels as employers hold on to more workers. More hiring would help convince Federal Reserve policy makers that the economy can withstand an increase in the benchmark interest rate this year. Claims have remained below the 300,000 level since March.

Outplacement consult Challenger, Gray & Christmas reports employers announced 105,696 layoffs last month. A year ago, U.S. companies announced plans to cut 46,887 jobs. The Army accounted for more than half of the total with 57,000 cuts expected over the next two years. The technology sector also contributed to July’s announced job reductions, with computer and electronics companies announcing 18,891 layoffs in July.

Tomorrow is the big monthly jobs report; and it probably represents the most important data the Fed will consider before the September 17 FOMC meeting. And the Fed will need to communicate any action beforehand to avoid disruption in the financial markets. We may be seeing a rate hike being priced in right now. The major averages came off session lows in the close. The Dow Jones industrial average ended at its lowest level in 6 months and posted its first 6-day losing streak since October.

The Dow Industrial Average is trending slightly lower, having fallen below its 200 day moving average. The S&P 500 is still in a very flat or sideways trend, but it is just about 10 points above its 200-day moving average, and it has posted losses in 10 of the last 15 sessions. And keep it in context; we’ve had good economic news; earnings season has been solid. But, good news on the jobs front could be bad news for the markets. The S&P has been in a historically tight range for the past 9 months. Something’s got to give. The question is which way it will break. I’m leaning toward the downside, but we haven’t seen good confirmation, yet.

The Fed tends to dig deep into the jobs data. Here’s what they will probably be looking at: first, the gap between the U-3 and the U-6. The U-3 is the headline unemployment rate which stands at 5.3%. The U-6 is the alternative measure which includes unemployed plus underutilized workers – it stands at 10.5%. The difference, or spread, is 5.2%. In the 10 years before the recession began in late 2007, the average spread was 3.6 percentage points. If the gap narrows, even if the U-3 unemployment rate holds steady, it would signal to policy makers and financial markets that the labor market is fully healing from the recession in some important ways: fewer workers stuck in part-time jobs, and better wages and more opportunities drawing those on the fringes back to the labor market.

The Fed will also watch the labor force participation rate; last month it came in at 62.6%, the lowest level since 1977. This indicates that people are moving out of the labor pool, and there is still significant slack. Was last month just a glitch in the data? We could see the headline unemployment number move higher as more people move into the market for a job, and would be considered good for the economy. The other area the Fed will watch is wages, which have been stagnant for what seems like forever. As long as there is not a dramatic and startling move, the Fed doesn’t really seem concerned about wages.

Since the start of 2013, payrolls have climbed at an average monthly pace of 225,000. And government data out tomorrow is expected to show a similar-sized gain in July. Of course, part of that is recovery from the downturn – in other words, we are still in the process of taking slack out of the labor market. Generally speaking, the economy only needs to add 150,000 jobs per month to maintain employment levels; some analysts say we could hold steady with just 100,000 or so new jobs per month. So the Fed doesn’t need a big jobs number to justify a rate increase.

The Fed has two mandates: maximum employment and price stability. And while we’re not at maximum employment, and nobody is quite sure exactly what that is, price stability may be easier to spot; the most common gauge is inflation, which is running below target.

Commodity markets continue to slide. Oil can’t seem to find a bid even after the Energy Information Administration (EIA) reported a whopping 4.4 million barrel drop in weekly crude oil supply, much larger than expected. So oil is moving on other issues each day, like Fed speak and the Chinese stock market and other issues. If the Fed raises rates, the fear is that U.S. demand will fall. In China, if demand slows, oil is toast. Saudi Arabia is feeling the pinch of the oil -price war that they started. Reuters reports that “Saudi Arabia has issued its first sovereign bonds since 2007 to cover a budget deficit created by low oil prices, launching a series of debt sales that could reshape its financial markets. The government sold $4 billion of bonds to local banks this year.” Of course oil has crashed three times this year and anyone who got short at these levels lost big. Maybe the third time will be the charm, or not. Today, crude dropped .31 = 44.84

Meanwhile, a sharp fall in prices for vegetable oils and dairy products saw the Food and Agriculture Organization of the United Nation (UN)’s food price index fall to 164.6 points last month, one percent lower than in June and 19.4 percent lower than last year. The index is trade-weighted, and follows international market prices for cereals, dairy, sugar, vegetable oils and meat.

The Bank of England’s policy makers decided that price pressures are too weak to raise interest rates for now; policymakers left rates unchanged at a record-low 0.5%.  The BOE governor said that the outlook is “consistent” with the need for higher borrowing costs — but only in due course.

The average rate for a 30-year fixed-rate mortgage dropped to 3.91% in the week that ended Aug. 4, falling to the lowest level in two months, from the prior week’s reading of 3.98%.

Greece’s banking share index headed back uphill this morning, following a three-day plunge that wiped out 63% of its market value. Greek stocks are also bouncing, with the ASE Stock Index +3.7%.

Tesla posted a wider quarterly loss, revising down its sales forecast, and stating that it may need to raise more cash to offset heavy spending. The company posted a net loss of $184 million in Q2, compared with a loss of $61 million in the year-ago period, and it’s now possible Tesla won’t be cash-flow positive until early 2016. The automaker also lowered its full-year sales outlook to 50K-55K cars. There is still strong demand. The problem is with production as the electric car company prepares to introduce a new, lower cost model later in the year. Tesla (TSLA) dropped 8% today.

Automakers recalled more cars in the U.S. through the end of July (34.5 million vehicles) than during any other similar time frame except 2014 – highlighting the lax quality standards of the auto industry and unprecedented government crackdown on safety lapses. Honda recalled 8 million vehicles due to defective Takata air bags; Fiat Chrysler called back more than 9.6M vehicles due to cybersecurity gaps and rear gas tank fires.

Keurig Green Mountain (GMCR) shares were down about 29 percent, after the K-Cup coffee maker announced a workforce reduction of about 5 percent, as quarterly revenue and sales projections missed forecasts.

Coca-Cola Enterprises will merge (KO) with two Western European Coca-Cola bottlers to form the largest bottling company serving over 300 million consumers across 13 countries.

Creating the world’s largest publicly traded nitrogen company, CF Industries and OCI have entered into an agreement under which CF will combine with OCI’s European, North American and Global Distribution businesses in a transaction valued at approximately $8 billion.

Bill Ackman has built a $5.5B stake in Mondelez, betting that the snack maker will become a large target in a wave of consolidation reshaping the food industry. The new move squeezes Mondelez between two well-known activist investors. Nelson Peltz’s Trian Fund Management also holds a substantial stake in the food company.

Viacom fell 14 percent (VIAB) to its lowest in almost four years after reporting lower-than-expected quarterly revenue due to weakness in its cable TV business. Walt Disney was down for a second session after it lowered profit guidance for its cable networks unit on Tuesday. The S&P 500 media index lost 2.1 percent and notched its biggest two-day fall since November 2008, with Time Warner, Comcast, and CBS all in the red and Twenty-First Century Fox down 6.4 percent. All the media stocks are down and it seems people just want to get out of the sector at any cost and take any loss. Viacom’s results and Disney’s warning put the spotlight on a trend of viewers shifting from cable TV to Internet-based services such as Netflix, which rose 2.2 percent.