For the second session in a row, robust stock market rallies stumbled into the close. Today, it was comments from President Trump and members of his administration on Syria.
"I think what Assad did is terrible. I think what happened in Syria is one of the truly egregious crimes. It shouldn't have happened. It shouldn't be allowed to happen. I think what happened in Syria is a disgrace to humanity. He's there, and I guess he's running things, so something should happen."
President Donald Trump (aboard Air Force One)
When asked whether the United States will help with current international efforts to remove Assad, Secretary of States Rex Tillerson replied: “Those steps are underway.”
The drumbeats of war would be a major distraction, although ultimately, it shouldn’t alter market fundamentals. Of course, the Middle East has been a humanitarian, economic and political quagmire for two American Presidents, so any addition actions shouldn’t be written off out of hand.
"Circumstances rule men and not men circumstances" -Herodotus
Most military experts believe there were five options that could be used singularly or in coordination.
As it turns out, President Trump decided on tactic. Tomahawk launching 59 missiles, aimed at the base from which the chemical attack originated , and focused on warplanes, storage facilities and hangers.
The administration is saying its official policy on Syria hasn’t changed, but a message had to be sent and not only to Assad. Syria isn’t going away as an issue for the west, so while safe zones could be part of a longer term answer, near term challenges my require America to look the other way as long as the carnage is with conventional weapons.
This measured response wouldn’t hurt the market and in fact is a sign of strength.
That being said, many are worried about the so-called neocons wielding too much influence and pushing the envelope or cheering for it to be pushed wide open by the current administration. Let’s not forget this administration has already promised action against North Korea with or without the United Nations or China.
Wednesday major indices avoided closing in the red as late buyers emerged. But there is no doubt the old bull is facing new hurdles, including geopolitical, that could increase volatility.
On that note, while major equity indices eked out positive gains, crude oil was up more than 1% and seems to be on one of those unstoppable rallies. There could be a geopolitical support point in place for a while, too. (Remember when geopolitical risk put up to $20.00 in the price of crude?)
Of course, there would have been anxiety no matter the domestic or foreign policy news with the big jobs report out this morning. This report has to be a blockbuster for a number of reasons.
First, I think the number will be north of 250,000 in part because of ADP 263,000 and also the ISM manufacturing employment component, which surged 4.7% in March.
On wages, I look again at anecdotal trends like the JOLTS report with 5.6 million job opening and higher quits and initial jobless claims yesterday morning -25,000 pushing the overall number to 1970s levels (when the population was significantly smaller).
Stocks are lower after the jobs report came in significantly below consensus, and a million miles below my own modelling.
Stocks are off the worst levels of the pre-opening session, and I’m sure most professional investors will consider this a one-off or a wake-up call to Congress, which will be off (recess) for 24 of the next 32 weekdays, to get back to work and accomplish something.
I have misgiving with the accuracy of this number, and not in a conspiracy way, just simply, it doesn’t jibe with all the other sources of data from the government, industry and business world. For instance, construction jobs were significantly lower for the BLS report than ADP, but belies housing starts data as well.
I don’t want to react hastily on the jobs report.
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