There has been an avalanche of economic data coming up short of expectations, which doesn’t always mean the results are negative, but that the street was too optimistic. But the current string of misses has been even more acute in hard data and has been mostly “bad news.”

The Bloomberg Economic Surprise Index is at its lowest level in nine years. This week, Jerome Powell acknowledged the economy is slowing down, but the Fed still needs more convincing.

Rising Tide

Boeing (BA) news was great on Wednesday, lifting all but three sectors in the S&P 500.  We are watching Materials (XLB) for follow-through.

The story was about Technology (XLK), which means the Nvidia (NVDA) was edging higher. For the last couple of weeks, the narrative has been that tech and growth can rally without the rest of the market, or vice versa, so when most sectors move higher, it’s a good sign.

Based on bad economic news and the Fed is coming to the rescue, it's a good sign.

Market Breadth

The short session saw bullish breadth as up volume outpaced down volume by more than two to one for the NYSE and NASDAQ.

Market Breadth	NYSE	NASDAQ
Advancers	1,951	2,366
Decliners	867	1,713
New Highs	109	108
New Lows	21	113
Up Volume	1.28 billion	2.2 billion
Down Volume	515.18 million	1.15 billion

When Nvidia (NVDA) is bright green, the market is higher even if most stocks are red, but that was not the case on Wednesday.

The economy is slowing faster than Wall Street is modeling.

September Rate Cut

Before the jobs report this morning, the chance of a September rate cut was gaining huge momentum.

Jobs Report

The headline 206,000 jobs initially sent the market lower; the following headline of massive revisions (-54,000 May and -57,000 April) sent the market higher.

The unemployment rate climbing to 4.1% from 4.0 is orderly, but moving in the wrong direction for the economy.

Composition

Considering that 152,000 jobs came from education and government, this report is a sobering private sector proxy.

The bad news is good; it has always rubbed me wrong.  With that in mind, the Fed must cut long before reaching its inflation target, which itself feels more arbitrary than scientific.

Today’s Session

So many folks are on the beach, overseas, or in bed.  The volume will be light, meaning the most passionate part of the market will have a chance to dominate.

Right now, bulls have an enormous ax to grind as they must keep the momentum going, which is an integral part of the value proposition.

Buy stocks because they are going higher. We don’t fight the tape or momentum, but we argue that you must always focus on fundamentals, even if other things are improving.

Comments

Agree and the two top employment job growth areas once again. It doesn't point to a stronger private sector growth. I wish Education and Health Services was broken down better around the gains there and how much of this job creation can be directly tied back to outsourced government spending initiatives? Then there are the backwards revisions, which areas were overstated as gains originally and have been adjusted lower since? Maybe that should get equal attention as well, when the initial headline numbers are reported. Just my wish list on that. Terry Dowler on 7/5/2024 11:06:32 AM

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