Futures vs FV: SP +28.71; DJ +254.78; NASDAQ +81.87
Futures were up before a strong jobs report. The catalysts: US and China said they would meet Monday on trade -- just as they said they would 3 weeks ago. Oh, time to rejoice and buy stocks on that!
Second, China cut its reserve rate requirement to push liquidity into its markets to try and thwart the crash in its economy.
EU PMI flops along now with China and the US. World economies flopping, that should be good for Fed hikes. China having to flood with liquidity; same. Time to buy!
Jobs came out, futures faded some then rallied back to or higher than they were before.
Jobs: 312K vs 176K exp vs 176 Nov (from 155K). October 274K from 237K.
Unemployment: 3.9% vs 3.7% as 400K reentered workforce.
Earnings: 0.4%, 3.2% year/year to 27.49 (+0.11)
Workweek: 34.5 vs 34.4
Participation: 63.1 vs 62.9 prior
Fed: Mester out pre-jobs saying the Fed was looking at 1 or 2 hikes in 2019, but if inflation did not rise then Fed can stop.
Seriously? Here is the real world: inflation rises when the supply side slows and demand remains. The jobs report is a classic example. It LAGS. Wages are rising but on the other side of the economy the ISM, PMI's, etc. are showing the supply side is slowing. More money chasing the same or fewer goods equals inflation. Thus, the Fed is saying that it will hike rates because inflation does rise when the economy slows from the supply side. It is using a lagging indicator as its data for its 'data dependency.' It is self-fulfilling, and more hikes only exacerbate the situation.
Of course you have 'experts' on CNBC, Bloomberg, etc. saying the jobs report confirms the economic strength, expressly discounting real time data such as the ISM, PMI's, jobless claims. They truly know nothing.
Also, the Fed is worried about an overheating economy when it has GDP in 2019 at 2.40 to 2.0%? When is that overheating? Since the Obama years when I warned we would be brainwashed into believing 2% growth was strong growth. It has happened. The future is here. We are, as I often wrote, Japan. And we have turned our wealth over to these people. Again, will the sheep of the US populace ever really wake up versus this fake 'woke' activism that targets capitalism and pushes socialism through fascist means? As with the Fed and the current economy, you have to wonder if it is too late.
But, I digress.
Bonds: 2.65% vs 2.552% 10 year. Rebounding yields after a crushing.
EUR/USD: 1.1376 vs 1.1395
USD/JPY: 108.20 vs 107.66. Rebounding in relief.
Oil: 47.96, +0.87
Gold: 1291.40, -3.40
Futures are holding gains into the open. The tennis match flip-flopping in the markets continues as the bulls and bears, in the form of algorithms, fight out the market direction. Just as in the old days but the moves are exaggerated by the algos.
Therefore stocks will gap higher on the heels of the dive lower Thursday that looked to be the failure of the rebound attempt. That said, this gap higher at the start is suspect. All gaps are suspect these days. We will see how this plays out -- these gaps to the upside when futures open and then a range trade from there are always very suspect.
Jon Johnson, Chief Market Strategist
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