Jim’s Notes – Jobs Report Better Than Expected

Moving the Market – June 8th Weekend Update & Outlook

The markets ended the week digesting a better-than-expected jobs report. Some anticipated selling but it didn’t really materialize for stocks. Yes, the indexes closed lower on the day but the activity was in the dollar, interest rates, and commodities. The dollar spiked higher on the news, sending gold and silver lower. In turn, interest rates jumped 15 bps on the day sending TLT down 1.8%. The domino effect was a reaction to the speculation building about the Fed cutting interest rates. When the jobs data was better it changed the view at least for the day. The indexes broke to new highs on Wednesday but the data kept the move higher from materializing. Now investors face the next challenge of both the FOMC meeting and CPI data next week. The good news is it should give clarity to the Fed’s view on interest rates and if inflation has cooled at all over the last month. Plenty to deal with on the horizon. Meanwhile putting the week of trading into perspective comes down to what the market wants and what it will actually get. I continue to ask the question, if the Fed cuts rates what happens to stocks? Do stocks run higher or will it be a case of buying on the rumor and selling on the news? Time will tell but it will ultimately depend on if stocks are perceived to be overbought or fairly priced. The leading sector Friday was financials up 0.4% and the biggest loser was utilities down 1.1%. For the week technology was up 2.6% as the leading sector. The downside leadership came from small caps, utilities, and energy all breaking support levels and advancing their respective downtrends. There is a lot to digest heading into next week. The key is to be patient and disciplined in managing your risk as well as looking for the next opportunity.

The major indexes closed the day lower as the broad markets held their own in the face of a better-than-expected jobs report. The volume was below average and all three indices closed in negative territory. For the week the NASDAQ was up 2.3%, SP500 gained 1.3%, and the Dow was up 0.2%. Friday the NASDAQ closed down 0.2%, DIA was up 0.2%, and the SP500 was down 0.1%. The major indexes closed lower on the day. The SOXX was down 0.2%. Small Caps (Russell 2000) were down 1.1%. The ten-year treasury yield was 4.43% up 15 bps for the day. Crude Oil (USO) was down 0.3%. (UGA) was down 0.7%. Natural gas (UNG) was up 4.5%. The dollar was up 0.8%. Plenty to deal with moving forward as we manage our money and emotions relative to the current environment.

Monday Outlook: The jobs report is behind us and we look to Wednesday when we get the FOMC meeting conclusion and the CPI data for May. Needless to say, plenty of economic data to hopefully provide some clarity with the Fed and interest rates. At least enough to end the speculation and offer some direction near term for stocks. 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 has shown positive and negative data points… thus, the speculation and lack of clarity for investors. The key is to follow the trends up or down. 1) Watching the dollar, does it hold the bounce from Friday? 2) Interest rates jumped to 4.43% on jobs report… do they fall or continue higher? 3) Crude oil remains in a downtrend… where is the opportunity? 4) Natural gas moving higher again with volatility. 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:

Changes coming to the S&P 500 index as they add CrowdStrike, KKR, and GoDaddy to the benchmark index. They will be added prior to the market opening on June 24th.

Moody’s puts several US regional banks on downgrade review over commercial real estate loans. This problem isn’t going away anytime soon. The rate of foreclosures continues to rise along with pricing pressure in large cities. SRS remains on our watch list.

Most restaurants are feeling the pinch as customer counts fall… then why are these doing so much better? Cava, Sweetgreen, and Chipotle stocks are at all-time highs. What gives?

Quote of the Day: “Immorality: the morality of those who are having a better time.” — H.L. Mencken.

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