Friends
Let’s start with the jobs report. 134,000 new jobs were created in September, and that was less than the 180,000 expected. But, the revisions upward for July and especially August were significant and thus gave the September number a little cover (as did the disruption from Hurricane Florence). The average hourly earnings number was about as expected, not too hot, and finally the unemployment rate itself fell to 3.7%, which was the lowest since December of 1969.
Bond yields spiked after the report with the 10 Year Treasury Note trading at 3.24%, and this sent the algos into motion and stocks sold off and continued to slump into midday. Again, the Dow was sporting a more than 300 point loss for the second day in a row, but just like yesterday some of the damage was erased in the last hour of trading. We saw those reversals all week, in both directions. When all was said and done, as bad as the last two days felt the Dow was only down 11 points for the week.
As for today, by the close the Dow Jones Industrial Average was down 180 points to finish the day at 26,447. The S&P 500 was down 16 points to close at 2,885. Gold was up $5 to trade at $1,207 per ounce, while oil was down $.02 to trade at $74.31 per barrel WTI.
It appears we are back to the paradigm that good news is bad news, with the thought that the better the economic news gets the more likely rates will rise and at some point become competition for stocks. As you know, TINA “there is no alternative” to stocks had been the battle cry for years. As rates rise, the multiple afforded to stocks will be revised. If earnings keep on climbing, then multiple contraction should not be an issue. But, the speed in which rates have climbed on the long end of the curve recently has gotten the attention of traders. Rates rising for good reasons, like strong economic data, is fine. But, market participants would prefer that any rise in rates occurs in an orderly manner. Let’s see if this continues into next week.
Have a great weekend everyone.
