Morning Briefing

U.S. economy added stronger than expected 199,000 jobs in November

U.S. economy added stronger than expected 199,000 jobs in November

The U.S. economy added 199,000 jobs in November, the Labor Department reported today, Friday, November 8. The unemployment rate dropped to 3.7% from 3.9% in October That surprised economists who had expected the unemployment rate to hold steady. The bond market reacted in the morning hours after the report was released at 8:30 a.m. New York time by selling Treasuries. The yield on the 10-year Treasury gained 8 basis points to 4.233% as of 10 a.m. in New York as bond prices fell. The yield on the two-year Treasury jumped 78 basis points to 4.669%.

Jobs market continues to slow: I’m sure that makes the Fed happy, but how do “real” people feel?

Jobs market continues to slow: I’m sure that makes the Fed happy, but how do “real” people feel?

In October job openings in the U.S. economy fell to the lowest level since early 2021. I’m sure that make the Federal Reserve happy ahead of its December 13 meeting on interest rates. The Fed has been looking for sign that the labor market is cooling off. And it’s getting plenty of them recently. (And will probably get more on Thursday and Friday when the government reports new claims for unemployment and the jobs situation for November.) The question, for those few of us who still see a recession in 2024 as a danger, is When is slower too slow? A slowing labor market means fewer gains to average weekly earnings. Which translates into either less consumer spending, or consumer spending fueled by more debt.

Some in the bond market are saying the bond rally has been too far, too fast

Some in the bond market are saying the bond rally has been too far, too fast

I’m hearing some chatter that says bond traders and analysts are stepping aside from the bond rally. Or are planning to do so. Their argument is that the move has been too far, too fast. Specifically, I’ve heard talk of selling if the yield on the 10-year Treasury hits 4.00%. On Friday, the yield was 4.20%. So I’d be watching to see if anything like a bond rally pause or reversal materializes during the days ahead of the Federal Reserve meeting on December 13

Powell tries to temper Wall Street belief in rapid interest rate cuts but no one is listening

Powell tries to temper Wall Street belief in rapid interest rate cuts but no one is listening

It wasn’t the most forceful pushback it’s true, but the financial markets paid attention to Federal Reserve Chair Jerome Powell’s attempt to say interest rate cuts aren’t just around the corner for about two minutes. And then the rally based on a belief in 4 or 5 cuts in 2024, and as early as March (and certainly by May), was off and running again.

Put a fork in it! Interest rates will definitely be on hold at December meeting, the market decides

Put a fork in it! Interest rates will definitely be on hold at December meeting, the market decides

The Dow Jones Industrial average soared 1.47% today–or 520 points–as the Federal Reserve’s favorite inflation measure showed that inflation continued to fall in October. The inflation news, the market decided, was exceedingly good news for the old economy stocks in the Dow 30. In contrast, the new economy stocks in the NASDAQ Composite fell 0.23% on the day.

This looks like some profit taking among tech stock winners

This looks like some profit taking among tech stock winners

Hedge funds are unwinding some of their overweight positions in technology stocks after their concentration in the sector reached record levels, according to Goldman Sachs. Net selling in tech, media and telecom stocks last week was the most since July, Goldman Sachs wrote in a note today. Information Technology (XLK) and Communication Services (XLC) were the most net sold sectors, Goldman said. And, among subsectors, sales of software stocks, chips and chip equipment and interactive media and services “were by far the most net sold.” The outweighed buying in IT services and media.”

Rally or bear trap: Concentration in megacap tech stocks reaches a record high

Rally or bear trap: Concentration in megacap tech stocks reaches a record high

I’m trying to decide if we’re watching a legitimate rally or a classic bear trap. If this rally is real, and likely to run for a while, investors should be putting cash to work even at market highs. If it’s a bear trap-you know one of those upward moves designed to pull in cash from the sidelines just before green turns to red in the market, then you ought to be using this moment as a selling opportunity, taking profits, and building cash for better barging down the road. A new survey by Goldman Sachs shows concentration in big tech stocks is at a record high. What does that mean?