Did Today's Job's Data Change Anything?

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Includes: DIA, IWM, QQQ, SPY
by: Mott Capital Management

Summary

For the month of June there were 287k jobs created, about 100k more than the estimate. Miraculously the unemployment rate rose to 4.9%, while the labor participation remain unchanged at.

We are that point in the markets again, where we seem to run out of steam, right around this 2110 -2120 range.

The VIX is sitting at around 13.50 this morning, which again is the bottom end of its range. To me, this means the market is not feeling very nervous current.

Top News

For the month of June there were 287k jobs created, about 100k more than the estimate. Miraculously the unemployment rate rose to 4.9%, while the labor participation remain unchanged at 62.7%. The U6 unemployment was virtually flat at 9.6%. Hourly earnings, ticked up $0.02 to $25.61. Also, after two months of contraction in the size of the civilian labor force, it expanded in the month of June by 414k. In my book, nothing changed. I realize there was a jumped in the number of jobs created, but what else changed besides nothing. The U3, U6, Labor Participation rate and Wages didn't budge. The market apparently disagrees with me to this point, with the S&P 500 up about slightly over 1%, as of 11 am.

Equity Market

As I mentioned in the opening paragraph, the S&P 500 is up over 1% with the help of the Jobs report. I have to say we are that point in the markets again, where we seem to run out of steam, right around this 2110 -2120 range.

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There is just so much congestion in the S&P 500 around this area going all the way back to January of 2015. I'm curious to see what happens this time. Do we finally get that break that sends the market to 2150 or does it repeat what every other time we have gotten in here in the former, head lower?

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We stalled out several times already only to enter periods of extreme volatility. I have said this before I think there is enough juice in the system to keep the markets afloat, but not enough to send it much higher from these current levels.

Sector Spotlight

I thought today we could focus on the VIX, only because we are talking about volatility. The VIX is sitting at around 13.50 this morning, which is the bottom end of its range. To me, this means the market is not feeling very nervous with the current conditions. Should the market being feeling nervous? I honestly haven't a clue. The way the week started with the talk of Italian Banks and European Banks, you'd think it would be a little bit more nervous. It isn't though. Not yet. Click to enlarge

Currencies

All the major currencies jumped upon the Jobs data initially weakening vs. the dollar, only to reverse and then reverse again. The foreign exchange markets at first didn't seem to know exactly how to respond.

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We can see the euro is currently weakening vs. the dollar. However, you can see all of the confusion the data created.

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The same holds true for the pound regarding the confusion. However, we can see the pound is strengthening vs. the dollar. There are obviously other factors at play here for the pound, though.

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The Yen is currently back to its old tricks of strengthening vs. the dollar as well. It is interesting to note that former Fed Chairman Ben Bernanke will be in Japan next week and will be meeting with PM Abe and BOJ Governor Kuroda, their second such meeting since June 25th.

Commodities

Look at the price of Corn; it has been beaten very severely since the middle of June. Most of the weakness is due to reports of larger-than-expected stockpiles and higher than expected planted acreage. Throw in an improvement in the summer weather outlook and you get the chart below.

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Yield

The 10-year is relative flat today, trading around the 1.39-1.40 level. You can see from the chart below we briefly refilled that gap at 1.45% this morning after the Jobs report and had resumed trading lower.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.