(Post-NFP update) – The non-farm payrolls figure came in at 169,000, falling short of expectations. Consensus expectations were 180,000 prior to yesterday’s strong data, which prompted some to raise expectations to ~200,000. Futures do not seem troubled by the number, though, as perhaps the perception is that it makes the Fed less likely to taper in September. It will be interesting to see how this disappointing figure affects the 10-year treasury bond during today’s session after yields climbed above 3% for the first time since 2011 yesterday. If yields come off a bit, it could end up off-setting any disappointment for stocks about the still-lethargic employment recovery.
(Written prior to NFP report) – It was a pretty quiet night around the world with Europe basically flat as it waits for the US non-farm payrolls figure. Asia continues to hold up as Shanghai is trying to create a new uptrend. India is 10% off its Summer lows and it looks like there could be a bottom there. Nikkei pulled back 1.2% but it was up 5% so far this week.
The S&P is about 30 handles higher than it was a week ago as we wait for the NFP. After strong initial jobless claims and ISM non-manufacturing yesterday, initial projections of 180,000 job gains have given way to expectations closer to 200,000. Our thesis of rising rates continues as we are now above 3% on the 10-year, even a bit faster than I anticipated.
The S&P almost hit its 50-day MA yesterday but couldn’t power through it. Today it could try again (it stands at 1664ish) but a lot will depend on the jobs report. IF the Bears want this to be a “right shoulder” they should defend the 1670-1674 area in coming sessions. Support stands at 1653 then the 100-day at 1641ish.
Despite the choppy action in indices there continues to be lots of nice movement in individual stocks. A group of tech leaders that includes Facebook (FB), LinkedIn (LNKD) and Netflix (NFLX) has continued to act tremendously strong, while some recent laggard names like Google (GOOG) and Amazon (AMZN) woke up with “Day #1” type moves on Tuesday that continued through yesterday.
Yesterday it was very refreshing to see “good news” equate to “good news” for stocks. The market did close off its highs of the day, but it was constructive to see stocks absorb such a sharp spike up in bond yields and finish in positive territory. With rates moving above 3% after the close yesterday, it’s again encouraging to see futures pointing higher.
If we do get a number 200,000+ NFP number, it’s hard to say what the reaction could be. I think we may get an initial move lower as some will say it “cements” QE tapering later this month, but I think after the reflex move it could be bought. The Fed seems to be setting a course out of its controversial asset-buying program, so it’s about time the economy picks up some of the slack.
Disclosure: Scott Redler is long FB, BAC, BBRY calls