Friday, May 6, 2022

Morning Note: No Bad News on Jobs, So No Good News for Stocks

US stock futures popped a tad higher at 5:30am pt when the jobs number was released. While the number -- the establishment survey number -- came in at 428k, which was 58k higher than expected, the month-on-month hourly earnings miss (.3% vs .5% expected), the household survey number showing a loss of 353k jobs and revisions (establishment survey) totaling -39k for the prior 2 months, had, I suspect, the market thinking maybe there's less inflationary pressure percolating in the jobs setup.

Well, as I type, that brief endorphin burst has given way to the reality that, on balance, the jobs number came in close enough to expectations to not inspire a course-change at the Federal Reserve.

Yes, weak economic news right here would be good news for stocks... 

Keeping this morning's note brief; economic update on deck...

Asian equities were a mess overnight, with Japan being the only market among the 16 we track closing higher.

Europe's getting whacked this morning as well, with all of the 19 bourses we follow trading down as I type.

US stocks are lower to start the day: Dow down 220 points (0.67%), SP500 down 0.72%, SP500 Equal Weight down 0.85%, Nasdaq 100 down 1.10%, Nasdaq Comp down 1.07%, Russell 2000 down 0.72%.

The VIX sits at 33.20, up 6.76%.

Oil futures are up 1.48%, gold's up 0.07%, silver's down 0.53%, copper futures are down 0.73% and the ag complex (DBA) is down 0.72%.

The 10-year treasury is down (yield up) and the dollar is down 0.28%.

Among our 37 core positions (excluding cash and short-term bond ETF), only 5 -- carbon credits, oil services stocks, our energy stocks ETF, AMD and gold -- are in the green so far this morning. The losers are being led lower by MP Materials, uranium miners, solar stocks, Albemarle, base metals futures and Disney..

During a review meeting with an astute client yesterday afternoon we discussed how the Federal Reserve has backed itself epically into the proverbial corner. Reading Charles Goodhart's 2020 book The Great Demographic Reversal last evening had me thinking a lot about that earlier conversation. Per the following:
"...public sector fiscal finances will feel the full pain of any increase in official interest rates almost immediately. With corporate sector finances having become increasingly fragile, and (populist) political calls for keeping interest rates low, the Central Bank will become under intensifying pressure to keep any increases in interest rates gradual and limited. But if such interest rate increases remain gradual and small, then the present incentives to extend and expand debt finance remain in place. That is the debt trap in which so many of our countries have now become ensnared."

--Goodhart, C. A. E.. The Great Demographic Reversal
Have a great day!

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