There has been a some back and forth in the stock market this week, as the indices have hinged on the rotation in, out, between, and all around the mega-cap stocks. Yesterday was a very good day for the mega-cap stocks and that translated into a good day for the market. Still, it wasn’t enough to pull the market higher for the week.<\/p>\n\n\n\n
Entering today, the market-cap weighted S&P 500 is down 0.2% for the week and the equal-weighted S&P 500 is down 0.3% for the week.<\/p>\n\n\n\n
Not to sound glib, but the market could go either way today, resulting in a winning week or a losing week. We say that knowing that the November employment report was a solid report overall, but also knowing that, because it was solid, it didn’t necessarily support the market’s notion that the Fed will cut rates sooner than later.<\/p>\n\n\n\n
Today, therefore, could give us a glimpse of whether the market sees good economic news as good news for earnings or good economic news as bad news for the rate-cut appetizer it has been feasting on the last five weeks.<\/p>\n\n\n\n
The S&P 500 futures are down seven points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 68 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 40 points and are trading fractionally below fair value.<\/p>\n\n\n\n
Notably, Treasury yields moved higher immediately after the release that featured a 199,000 increase in nonfarm payrolls, a drop in the unemployment rate to 3.7% from 3.9%, and a larger-than-expected 0.4% month-over-month increase in average hourly earnings that left the year-over-year change at a moderating 4.0%.<\/p>\n\n\n\n
The key takeaway from the report is the recognition that the unemployment rate dropped as the participation rate increased, which suggests hiring activity in November was — word of the day — solid. In fact, the number of employed civilians increased by 747,000 while the number of unemployed civilians decreased by 215,000.<\/p>\n\n\n\n
The 2-yr note yield, at 4.63% just before the report, shot up to 4.72% and is at 4.69% now. The 10-yr note yield, at 4.18% just before the report, spiked to 4.27% and is at 4.23% now. The probability of a 25 basis points rate cut at the March 2024 FOMC meeting has been reduced to 50.3% from 64.5%.<\/p>\n\n\n\n
<\/strong>Notable headlines from the September Employment Situation Report:<\/p>\n\n\n\n\n