The bears got slammed on Friday as the
(INDEXSP:.INX) soared past the key 1600 level following a
better-than-expected jobs report.
Following a recent spate of economic data implying a US slowdown,
not to mention an earnings season that can be described as so-so at
best, it appears that expectations were fairly low heading into
this morning's jobs report.
Thus, the bears were caught off guard when the big headline number
-- the change in nonfarm payrolls -- came in at 165K, beating the
138K consensus. Additionally, both the February and March numbers
were revised up significantly.
On the negative side, average weekly work hours and aggregate
earnings declined while the underemployment rate rose, but again,
expectations were fairly low and traders were content to cue off
the positive headline numbers.
That 165K print drove a day that can very much be described as
risk-on. The small-cap
(INDEXRUSSELL:RUT) was up significantly, as were
economically-sensitive sectors like Industrials and Materials.
We also received the April ISM Services report today, which
disappointed slightly at 53.1.
On the flip side, we saw sharp falls in safety plays, with utility
and health care stocks (the two best-performing sectors of 2013)
being notable underperformers. There was also a sharp increase in
US Treasury yields as bond prices fell.
Somewhat unusually, high-yield bonds were flat-to-up on a price
basis today. This took some traders by surprise; when considering
the sharp increase in yields, the conventional wisdom would imply
at least a modest decline in the high-yield market. This particular
sector has been on a tear as of late, and today's move, while not
impressive on a nominal basis, represents an extension in momentum
for a seemingly overheated sector.
In earnings news, we saw better-than-expected numbers from
Automatic Data Processing
), and misses from
WellCare Health Plans
Overall though, as noted above, earnings season has not been
terribly impressive and we didn't see anything to change that view.
Tomorrow's Financial Outlook
There are no economic data releases on the calendar for Monday.
Earnings season will continue, however, with notable reports coming
(TSN) before the open, and
Plains All American Pipeline
(EOG) after the close.
Near-term market direction remains hard to gauge as lately the
market's been inclined to remain stable on bad news yet jump on
positive news. This trend is generating a lot of frustration among
the bears, who are not seeing price confirmation of the slowdown
they correctly see in economic fundamentals. This may be an
indication of the low expectations referenced above, and which were
perhaps best encapsulated today in this morning's pre-NFP Drudge
Report headline: "How Low Will It Go?"