tsptalk's Market Talk

[tsptalk]

Stocks open lower despite another pullback in yields - that's 4 days in a row if the loss holds on the 10-year T-note. It it testing support that has been holding in recent months, and in about 15 minutes the JOLTS employment data will be released and it could have an impact on yields.

I had so much to talk about in today's commentary that I didn't even notice that the dollar broke down yesterday - something I normally check often. It's up this morning but the technical damage has been done.

It's odd out there. I see some big improvement to some of the charts yet internally there is still a lot of weakness.

It's a slow start today and that is evident by the media's obsession with HelloKitty and his Gamestop holdings.

 

[tsptalk]

Yields are down and stocks started the day on the upside -- but where will they close on this intraday merry-go-round?

The S&P 500 finally filled that open gap - something I have been tracking since it is so similar to the April version of that negative outside reversal day, and subsequent action. It could plow right through it and test that old high, or it could fail in this area like it did in April. The S&P has been holding up well, but...

Small caps, and especially the market leading Dow Transportation index, have been lagging badly. This chart has breakdown written all over it, and if that's the case, will the rest of the market follow this leader, or with the disconnect continue? I'm asking for a friend.

 

[tsptalk]

The Equal Weighted S&P 500 Index (same 500 stocks) is up half of what the S&P 500 is up today. So this is mostly just an Nvida rally (+3.6%), but it still helps the C-fund just the same. It's just a little less bullish than it looks.

Nvidia is now the 2nd heaviest weighted stock in the S&P 500, behind only Microsoft. Apple is a close 3rd.

 

[TommyIV]

"What we see happening before our deadline is not what is happening when our trades are executed at 4 PM."

- From your commentary today


It is nice to see a change from that today. The stock indices kept their trend we saw at the TSP trade deadline through the day and even closed with better gains than expected for anyone selling. Let's hope that the trend of consistent action continues. I don't expect tomorrow (6/6) to have any surprise swings ahead of the Jobs Report the market is waiting on Friday morning.

 

[tsptalk]

The Dow was up triple digits this morning, but it gave most of that back and stocks and bonds are mostly flat to start the day as we await tomorrow's important jobs report. Important in that it could be a market mover, but as we have seen repeatedly, these reports are quite fluid and adjusted in future reports, so the importance is trying to glean what the data means for the economy, hence interest rates, hence stocks, while really not caring how accurate the numbers really are. What the report really tells us is, which way are investors and traders taking the market.

A strong jobs report is good news for the economy, but perhaps bad news for interest rates, and the stock market will react accordingly.

A weak report will tell us that the economy may be feeling the effects of over 500 basis points of interest rate hikes since 2022, and that is exactly what the Federal reserve was trying to do, in their efforts to keep inflation from getting out of control.

Also, a strong report or a weak report can get too extreme. If it's especially strong we could see some concerned selling because it increases the chances that interest rates would not be coming down anytime soon, yet the number could be big enough to surmise that this has to be good for corporate earnings, thus market can't dismiss that.

Or the report can be so weak that it almost guarantees lower rates sooner than later, which could trigger some program buying, but fundamental analysts would have to interpret this as an economy killer.

So, good report or bad report is subjective, yet once the report is released the the entirety of the world economics will come together and move the market one way or the other like a giant mastermind that determines what it all means, while the no one individual really knows.

I think I had too much coffee this morning.

 

[TommyIV]

The question is, who already knows the numbers, and how are they positioning themselves ahead of the public reveal?

Also, and I have not looked into this, how accurate are ADP's payroll data they put out ahead of the Bureau of Labor Statistics's non-farm payroll? Their numbers on Wednesday would allude to weak jobs data in line with the Fed's intentions.

 

[tsptalk]

Oh, a conspiracy theorist... that's my job.

Those other jobs numbers don't always tell the same story, which is fishy in itself.

 

[weatherweenie]

Based on the results of the latest tsptalk poll, you have A LOT of conspiracy theorist company.

Oh, a conspiracy theorist... that's my job.

Those other jobs numbers don't always tell the same story, which is fishy in itself.

 

[tsptalk]

10-year Treasury yield shoots higher after May payrolls top expectations

The yield on the 10-year Treasury surged Friday as investors assessed a strong nonfarm payrolls number for May that fueled concerns that the Federal Reserve may not cut rates as soon as expected.

The yield on the 10-year Treasury jumped 14 basis points to 4.422%.

U.S. Treasurys ahead of May jobs report

 

[tsptalk]

The knee-jerk reaction to the jobs report was negative, but so right now investors are more concerned about interest rates than the economy. That could potentially change before the end of the day as it seems counter-productive to sell a strong economy. Most expected that kind of reaction, and the market may have been looking for an excuse to consolidate the recent tech rally.

The chances of rates staying where they are (no cut) in September went from 31% to 44% after the data came out.

Let's see how it plays out. Nothing would be shocking.

Yields are popping...

 

[tsptalk]

Jobs report tidbits.

The unemployment rate ticked up to 4%, the participation rate ticked down, and at the same time, "The survey of households used to compute the unemployment rate showed that the level of people who reported holding jobs fell by 408,000."

Also, "The household survey also showed that full-time workers declined by 625,000, while those holding part-time positions increased by 286,000."

And...

Previous months’ reports saw small revisions: The March gain dropped to 310,000, down 5,000, while April’s saw a cut of 10,000 to 165,000.

So, outside of the headline number, this sounds like a weak report. It wouldn't surprise me if stocks rebounded by the close -- and its not because I am bullish. I'm actually hoping for a pullback. Although, if investors worry about the economy over the Fed cutting rates, I can see why stocks would fall on the data.

 

[tsptalk]

We're seeing a little bounce off the opening gap down in stocks, but yields and the dollar are up and putting some pressure on the stock market. The jobs report's mixed, but inflationary result shifted the trajectory of yields, pushing bonds (F-fund) down (yields up) and the dollar will also rally on inflationary data. The 10-year moved above its 50-day EMA and the dollar's quick move up has it getting close to the April highs already.

But stocks are holding on after that initial drop and rebound, but the morning gaps are filling and there's a long way to go before today's game is over.

Small caps filled the open gap already, and we could see some retracing of Friday's loss today, but this is clearly in a down trend while that channel remains intact.

There's a long way to go today, and it's going to be a busy week for economic information with the CPI, PPI and the Fed meeting coming up.

 

[rangerray]

This is a little off topic, but in a previous commentary you said something of the nature that you thought the Fed Reserve would probably avoid doing anything that appeared politically motivated.

After the last few years, I’d be astonished to know that there was any government agency that can be trusted.


Scott Harrison
Senatobia, MS

 

[FAAM]

hmm... that thought seems perhaps overly & relatively negative to me -- edgy even. I'm tempted to comment more on it though will hold my tongue. Best wishes for the economy & our investing!

 

[weatherweenie]

Sorry, but that is a ridiculous thing to say.

After the last few years, I’d be astonished to know that there was any government agency that can be trusted.


Scott Harrison
Senatobia, MS

 

[weatherweenie]

It is sad, dangerous even, that people have been willingly lead astray by their political party leaders.

hmm... that thought seems perhaps overly & relatively negative to me -- edgy even. I'm tempted to comment more on it though will hold my tongue. Best wishes for the economy & our investing!

 

[The_General]

Am I the only one frustrated by Charles Schwab server being down this morning with no way to log into my accounts? Grrr.....

 

[tsptalk]

Not good! Are you buying or selling?

 

[tsptalk]

Stocks opened lower this morning and ironically the big move comes on a day with little news. What's going to happen when the data starts rolling out tomorrow? Is this a push lower to get small investors to sell so the big firms can send it higher tomorrow? Or did some info leak? :notrust: We've seen weak mornings turn positive recently so don't count the bulls out yet.

Yields are down filling in yesterday's gap, but the bottom of the gap and the 50-day EMA are holding so far. The real damage being done today is in the I-fund.

Take a look at the EFA (I-fund) as it plummets more than 3% this morning. So much for any bull flag there.

The dollar is up and we are seeing oil and silver down, but gold is up. Bitcoin and other cryptos are getting hit hard today as well.

 

[JTH]

Take a look at the EFA (I-fund) as it plummets more than 3% this morning. So much for any bull flag there.

The dollar is up and we are seeing oil and silver down, but gold is up. Bitcoin and other cryptos are getting hit hard today as well.

Makes it hard to invest in the I-Fund when you also have to consider USD.

It's like trading two charts where you have to be right twice...