Jim’s Notes – Markets Pause Ahead of Jobs Report

Moving the Market – June 6th

The markets take a pause ahead of the May Jobs Report. Following the break to new highs on Wednesday the major indices were flat on Thursday trading in place most of the day. With the data the next potential indicator for the Fed to cut rates it took a break. Investors continue to be obsessed with the Fed and rate cuts. I continue to ask what happens when they cut rates. The leading sector was consumer discretionary up 0.7% and the biggest loser was industrials down 0.5%. The S&P 500 index closed down 0.02%. The big news of the day was the ECB cutting interest rates. Will the Fed follow suit next week? Not likely, they will want to ‘make sure’ inflation is falling before they cut. Initial Jobless Claims bumped higher offering more indication of a softening jobs market. The trade balance rose to -$77 billion as imports rose 8.7% while exports were up only 0.8%. We are bringing in more goods as China catches up on the production of goods and a stronger dollar. Overall it was a day of rest for traders as we look forward to the jobs report Friday. The data will be released before the opening and will set the tone for the trading day. The expectation is for 182k new jobs added versus 175k prior. The unemployment rate is expected to remain at 3.9% and average hourly earnings will rise by 0.3%. Taking it all in stride one day at a time. Happy Friday.

The major indexes closed the day flat as the broad markets traded in place on Thursday. The volume was below average and all three indices closed with doji candles. Utilities struggled on the day resting support and showing a double top on the chart. The NASDAQ closed down 0.09%, DIA was up 0.2%, and the SP500 was down 0.02%. The major indexes closed flat on the day. The SOXX was down 0.8%. Small Caps (Russell 2000) were down 0.7%. The ten-year treasury yield was 4.28% flat for the day. Crude Oil (USO) was up 1.9%. (UGA) was up 1.7%. Natural gas (UNG) was up 1.9%. The dollar was down 0.1%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Friday Outlook: What will the jobs report say relative to the future Fed actions? That is the question to be answered at 8:30 am on Friday. The markets will move based on the speculation around the data. With the FOMC meeting June 11-12, we will get clarity on where the Fed stands relative to cuts. Throw in the CPI data on June 12th as well and there will be plenty of clarity for investors. Buy on the rumor, sell on the news… may well apply next week. The focus is clearly on the Fed and interest rates. Growth is still a big question mark overall. Economic data continue to confirm that. The key is to follow the trends up or down. 1) Watching the dollar, does it bounce back from recent selling? It has leveled off. 2) Interest rates, dipped back to 4.28% this week. 3) Crude oil bounced the last two days following the OPEC news. 4) Natural gas is trying to move higher again with volatile swings. 5) DBA climbing higher on wheat and coffee… inflation. 6) The answers are unfolding… we have to take what is offered up or down.

Headlines Worthy of Note:

Walmart shares hit an all-time high. Since they released quarterly earnings the shares have risen 12.1%. Can it go higher? Groceries are driving the run in profits and revenue. Worth watching how this unfolds near term.

Consumer stocks are struggling. They hit the lowest levels relative to the S&P 500 index since 2013. The chart below shows the slump starting in 2021. XLY is down 0.2% YTD.

Game Stop surged as ‘Roaring Kitty’ schedules YouTube return. GME rose 47% on the news. Can’t wait for the amazing return.

EV sales slump, and Hertz dumped vehicles from their supply of rental cars. They sold Teslas for a mere $25,000 per vehicle. EV prices have fallen by as much as 31.8% this year according to iSeeCars. TSLA was up 1.6% on Thursday but is down 31.9% for the year… interesting stat.

Quote of the Day: “That money talks, I’ll not deny, I heard it once: It said, ‘Goodbye’.” — Richard Armour.

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