Jobs Weakness?

Welcome to this week’s newsletter, where we recap Episode 78 of Your Next Trade. This episode covered the latest trends in the markets, highlighted key economic indicators, and previewed the upcoming earnings season.
Strong U.S. Job Market Shifts Expectations
Last Friday’s Non-Farm Payroll (NFP) numbers surprised with 254,000 jobs added—far exceeding the anticipated 150,000. Despite a gradual decline in job growth over the last three years, this latest figure suggests resilience in the U.S. economy.

Market Performance Recap
- Year-to-Date: Major stock indices like the NASDAQ and S&P 500 have posted over 20% gains. Interestingly, gold—a safe-haven asset—has also surged by 28%, signaling some market uncertainty despite strong economic performance.

- Weekly Highlights: U.S. stocks remained flat this week, while oil surged by 9%, driven by geopolitical tensions in the Middle East. The energy sector was the big winner, posting a 6% gain. The bond market saw yields climb as rates rose, putting pressure on interest-rate-sensitive sectors like home builders.

Key Market Factors
- Rising Bond Yields: With the U.S. deficit running high, the bond market is feeling the pressure, pushing 10-year yields higher. This development has significant implications, as higher yields tend to strengthen the U.S. dollar while weakening bonds and related sectors.
- Fed Policy: While earlier predictions suggested multiple rate cuts by December, strong NFP numbers and solid economic data have shifted the outlook to fewer and smaller cuts. The market now anticipates just 40 basis points in cuts, versus the previously expected 50.
Inflation and Economic Indicators
Despite widespread assumptions that inflation is under control, rising oil prices could signal upward pressure in the coming months. Additionally, key indicators like the ISM Services Index continue to show strength in the U.S. economy, which is currently projected to grow by 3% according to the Atlanta Fed.
Earnings Season Preview
The earnings season kicks off this week with big names like Pepsi on Wednesday and JPMorgan on Friday. Expectations for Q3 earnings have been lowered slightly, with analysts trimming their estimates by around 3%. Historically, this sets the stage for companies to exceed expectations, but with stocks already up 20-30% this year, the room for upside surprises may be limited.
Upcoming Catalysts
This week is packed with significant events, including:
- CPI and PPI Data (Thursday): Key inflation data could sway market sentiment. If the numbers are higher than expected, we might see a market reaction similar to the rally following the last CPI report.

- Fed Speakers: Numerous Fed officials are scheduled to speak, potentially providing more clarity on the direction of monetary policy.
- Earnings Reports: JPMorgan’s earnings on Friday mark the official start of the season. With lowered expectations, there’s room for stock volatility.
Final Thoughts
With U.S. elections and a critical Federal Open Market Committee (FOMC) meeting looming, the next few weeks will be pivotal for both the markets and the economy. Stay tuned for potential shifts in sentiment as new data rolls in.
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Have a great trading week!
Greg
greg@duponttrading.com
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