The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
No verdict, new highs
Overseas markets rallied but S&P 500 futures didn’t catch the fever. Futures were flat overnight and in early hours, only rallying a handful of points into the nonfarm payrolls release (+50k vs +70k est & +56k prior revised from +64k). This is a disappointing number but still shows a healthy labor market. The unemployment rate fell to 4.4% from 4.5%. Average hourly earnings surprised positively (+3.8% vs +3.6% est & 3.6% prior revised from 3.5%). The market welcomed these data. The labor market isn’t suggesting a precarious economic situation. The January Fed cut probabilities fell to 5%. The S&P opened +10 and slowly rallied further over the day. Shortly into trading, the Supreme Court said they would not deliver their tariff decision today and markets exhaled a bit. Usual January behavior ensued and we printed new all-time highs at lunchtime. The index added about 10 more points in the afternoon. Flow was typical, 100%.
The labor data didn’t significantly change the economic narrative, as expected. It did reinforce the story that the labor market is fine. This is a minor shift which is good for the economy but bad for Fed cut expectations. Nonfarm payrolls data is always important but today it didn’t move the markets much.
The Supreme Court ruling is now a day-to-day catalyst. It’ll arrive when it arrives but it’s probably not more than a business day or two away. The stories in the financial press indicate that *if* the tariffs are ruled illegal, the Trump administration will do something technically different but with a similar result. I don’t know about that but if that is true, the market probably won’t react too significantly. It’s anybody's guess though. We’ll just have to see.
It certainly seems as though markets aren’t *too* worried about the decision. This suggests that regardless of the decision, there’s not much downside risk. Hmmm. I think I agree but it’s a very interesting implication.
We’re more than a week into the new year and the January effect is on schedule. Next week earnings season kicks off.
I think the bulls have it made in the shade unless we get a bolt-from-the-blue.
See you Monday, have a great weekend.
-Mike
Visdom Market Commentary
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