Courtesy of Blain.
A good employment number which sort of offset the abysmal number from a month earlier pushed indexes to gap up at the open and another round of buying came in during the afternoon. The S&P 500 jumped 1.53% and the NASDAQ 1.64%. And just like that – 2 weeks after the zombie apocalypse known as Brexit – we are staring at the cusp of new highs for the S&P 500.
The nonfarm payrolls report showed the United States created 287,000 jobs last month, versus 175,000 expected by economists. The unemployment rate edged higher to 4.9%, versus the 4.8% estimate. Not as positive: May’s payroll count was revised down to only an 11,000 increase from the previously reported 38,000. Over the last three months, job gains have averaged about 147,000 per month.
“There was a great deal of worry after such weak jobs growth in May and with June’s jobs number much, much stronger than expected that provides relief,” said Kate Warne, investment strategist at Edward Jones. “At the same time, … it wasn’t so strong to suggest the Fed has to hike rates.”
“The equity market is trading on getting the best of both worlds: there is continued economic growth, but with inflation subdued and Brexit fallout uncertain, the Federal Reserve is unlikely to raise rates,” said Wouter Sturkenboom, senior investment strategist at Russell Investments.
After multiple efforts, the S&P 500 finally broke over those November 2015 highs. Next on the docket are the May 2015 highs which is only points away. Likewise the NASDAQ broke over our trendline in purple with vigor. Making “new highs” over those of early June will be the next step for bulls.
The NYSE McClellan Oscillator is now getting to overbought conditions short term.
What is causing people to scratch heads are as stock indexes rally to near all time highs, you have people throwing themselves into bonds – usually the relationship is an inverse one. (Buy stocks, sell bonds) But some attribute this to uncertainty worldwide with Brexit and the fact that U.S. bond yields – as paltry as they are – are still better than what is being offered in places like Japan and Europe. Still – it’s just weird to see this. TINA?
According to Dow Jones data, the S&P 500 has closed at a record high and the 10-year has closed below 2% only once in the last 40 years. That was back in 2013, as the U.S. economy was still emerging from the financial crisis, aided by a dollop of quantitative easing from the Federal Reserve. Colin Cieszynski, chief market strategist at CMC Markets told MarketWatch that yields diving lower can be explained by appetite from foreign investors, who are eager to gobble up Treasuries in a world where nearly $12 trillion in debt offers negative yields. Central banks have played an outsize role in fostering this unusual trading environment, aiming to boost sluggish economies with ultraloose monetary policies that have created distortions in financial markets.
“Even at the current low yields in the U.S., investors are still earning more than they could in the rest of the developed world. The U.S. Treasuries also benefit from being the most liquid market—and get some buying for safe haven purposes,” said Chris Gaffney, president of World Markets at financial services company EverBank.
Another way to think about this market dynamic is a popular acronym that Wall Street has adopted lately: TINA, or there is no alternative. In other words, in a world rattled by the prospect of anemic global growth, both U.S. stocks and bonds are benefiting because they are the only game in town.
Twitter (TWTR) continues its recent outperformance.
Nice breakout with nice volume in the housing sector (ITB).
It is also worth noting what sectors are leading the market – it is very different than the past year or two where it was “momentum stuff” – look at the ETFs for utilities, health care, and consumer staples:
Have a good weekend and stay cool out there; see you Monday as we start into a new earnings season.
