Friday was all about jobs as the market received the highly
anticipated May NFP report. Nonfarm payrolls increased by 175,000
in May, edging out the 163,000 anticipated by economists. However,
the unemployment rate was above consensusexpectations at 7.6%, and
hourly earnings were flat versus the 0.2% gain Wall Street was
Nonetheless, the market tends to take its directional bias on
jobs day from the headline nonfarm payroll number, so we saw some
very positive action in the markets today. Additionally, the report
wasn't quite strong enough to generate increased fears that the Fed
would taper its QE activities, though it should be noted that many
market observers are expecting some form of pullback in
intervention this year.
Economically sensitive areas of the market, such as financials,
energy, and small caps, performed fairly well. Likewise, US
Treasuries sold off sharply, and there was a serious decline in the
(INDEXCBOE:VIX) , which had perked up significantly ahead of
today's economic numbers.
From a technical perspective, today's rally extended the
(INDEXSP:.INX) bounce above its 50-day moving average, which has
served as a support level throughout 2013, presaging each stab
On the negative side, we saw deterioration in real estate stocks
following a strong start to the day. This area of the market has
been under serious pressure, courtesy of the recent rise in
interest rates, and it should be watched closely. Additionally,
junk bonds sold off following an early pop, indicating that
investors still fear a rise in interest rates and/or a slowdown in
broader economic activity.
Monday's Financial Outlook
There are no US economic reports, but we will see earnings
reports from auto parts dealer
) and momentum favorite
While some may be expecting a boring day, the lack of domestic
news doesn't necessarily make that a sure thing. The Japanese
market continues to swing wildly on the verge of a bear market,
housing may be on the verge of declining, and there is a distinct
lack of stability in credit, particularly in high yield.
Plus, we'll be seeing some international economic data reports
including Chinese industrial production and retail sales, and
Japanese consumer confidence.
Although it seems that there are more things that can go wrong than
can go right, the market has successfully fought through imperfect
economic fundamentals for quite some time now, so the near-term
direction is tricky to gauge.