Friday, November 02, 2018

Market Alert - Pre-Market

Futures vs FV: SP +9.18; DJ +169.21; NADSAQ -33.17

There is no better indication the markets are still controlled by the Fed when good news causes stocks to sell. Futures were up ahead of the jobs report. The report was not huge, it was very solid, and it blew away expectations. Wage growth, something sought after and the lack of lamented for a decade, is finally moving higher, yet it is something now to fear. We so wanted it but now fear it because . . . the Fed will do its best to ruin it. From a long line of ivory tower, Phillips Curve worshipping a**es, e.g. Mr. Broadus in the 2000's to today's FOMC members, when we finally have job and wage growth they want less.

Thus, when the participation rate jumped, wages rose 3.1% annually (10 year high), the jobs mix produces good, high paying jobs versus the prior administration's lowest pay scale job creation, we get futures fading.

Only in America -- when we have a Fed in charge of our lives. A republic democracy and we have a group of unelected people who have no clue as to what the real rate of interest is (self-admitted by Powell a month ago) trying to set an interest rate above the real rate. Just have a group of chimps at the zoo throw darts at a board.

Okay, that said, futures are still higher on all but NASDAQ. NASD is weighed by AAPL results, but it also was higher briefly pre-jobs report. Cause, effect as the Frenchman in Matrix Reloaded would say.

250K vs 190K vs 118K (from 134K)

Unemployment: 3.7% as expected and prior.

Wages: 0.2%, +3.1% year/year

Participation: 62.9% vs 62.7%

Workweek: 34.5 vs 34.5 vs 34.4 (from 34.5) -- more wages for the same workweek shows a BETTER mix of jobs.

Manufacturing: 32K

Construction: 30K

Services: 179K

Leisure/Hospitality: 42K -- even with the storms people were out spending their 'crumbs' of the tax reform bill.

China: Trump supposedly asked the Cabinet to draw up a trade deal after his telephone conference with Xi. Much rejoicing. Then a WHouse spokesman said there was still a long, long way to go. Of course there is. What you do is you draft the deal you want, get a framework to work with. What does this show? That Trump DOES want a deal versus overthrowing the regime. Or not. Can not both be accomplished? Get a deal the benefits us not China, that keeps the proletariat upset and keeps the notion of regime change in play as well as benefitting the US near term.

Bonds: 3.17% vs 3.146%

EUR/USD: 1.1409 VS 1.1399

USD/JPY: 112.98 vs 112.81

Oil: 63.11, -0.58

Gold: 1233.70, -4.90

SP500, DJ30 holding gains though off the highs. The big speculation today is four in a row. For us it is more whether the market can show a follow through. With the techs lagging, that would give any such move less confidence. We laid out the scenarios last night and they upside is trying to extend to set up a better test. That works and works potentially quite nicely.

Jon Johnson, Chief Market Strategist

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