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Morning Commentary

The Real Waiting Game is Over

By Charles Payne, CEO & Principal Analyst
3/9/2018 9:31 AM
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This was a solid session for the market on Thursday, but it remains trapped in an almost 2,000-point range for the Dow Jones Industrial Average (25,710 on the upside and 23,860 on the downside). That said, gains were relatively broad with consumer staples. The best performing sector was led by Molson Coors Brewing (TAP) and the continued rebound in the Monster Beverage Corp (MNST). 

In fact, one of the more compelling aspects of yesterday’s session was buying in stocks that have recently been hit, from Ulta Beauty (ULTA) to Dollar Tree, Inc. (DLTR).

S&P 500 Index

+0.45%

Consumer Discretionary (XLY)

+0.32%

Consumer Staples (XLP)

+0.91%

Energy (XLE)

-0.03%

Financials (XLF)

+0.31%

Health Care (XLV)

+0.67%

Industrials (XLI)

+0.52%

Materials (XLB)

+0.08%

Real Estate (XLRE)

+0.79%

Technology (XLK)

+0.44%

Utilities (XLU)

+0.74

 

The Real Angst

Yesterday was a wait-and-see with Trump’s industrial metals announcement. I think it was just a part of a larger period of the wait-and-see approach that began the last time the government released its jobs report. 

I know there have been all kinds of worries of the day from bond yields to tariffs, but the fact of the matter is that investors need clarity on jobs in general and wages in particular. 

Regular Folks Need a Raise

This is true after the January report saw wages climb 2.9% year-over-year. The reaction to that news was galling and somewhat embarrassing. 

Non-supervisory workers only got a 2.4% increase, which is significantly less than the 4.1% year-to-year increase enjoyed back in March 2007. 

The fact the folks on the top floors of those Wall Street ivory towers would panic that others are making too much money was a joke.

As for inflation, we are a long way from too much money chasing too few goods.

I don’t know how the market will react to the jobs news, but I think the news will be great. And for investors (folks looking to hold stocks more than 24-hours), great news is great news.

I have to believe that we are going to see a big spike in wages, as we got data from the ADP report and unit labor cost climbed 2.5% against consensus of 2.0%.

Today’s Session

Wow, what a blow out non-farm payroll number.  A real monster.  February added 313,000 new jobs versus the revised January number of 239,999 from 200,000.  December was also revised up to 175,000 from 160,000.  Unemployment rate remained steady at 4.1%, which seems quite eschewed, since the number has remained the same for 5 months in a row. 

Good Producing

Service Producing

Construction +61,000

Retail +50,000

Manufacturing +12,000

Professional & Business +50,000

Mining +9,000

Financial Activities +16,000

 

Healthcare +19,000

 

Leisure & Hospitality +46,000

 

Information -3,000

 

Minutes before this morning’s nonfarm payroll report was released, the Dow futures went from up 35 to down 50 points.  Immediately after the "goldilocks" nonfarm payroll numbers were released, the Dow shot up 220 points, pulled back to up 175 points and is now back to up 220, indicating and implied open on the Dow of 25,100.  An open of 25,100 would break us out of the previous three-day range, 24,500-25,000 and bring 25,710 into play.

The equity markets liked the so called "goldilocks" numbers, as job growth is strong, while wage growth remains subdued, helping keep inflation in check (for those that seem concerned about it) for the moment. Interestingly the 10-Year Treasury Note moved higher in yield, from 2.87 to 2.90.                    


Comments
You make some great points. I think it is healthy and expected that the 10-year Treasury would rise on the jobs report - the economy is looking strong enough to support higher rates. This far removed from recession, interest rates should be higher. The concern last month was that wage growth would cause inflation and the Fed would have to raise rates even if the economy couldn't handle it. This month's report showed the Fed can raise rates at whatever pace it chooses since inflation is in check, so it can allow the economy to flourish while still normalizing rates.

Rich on 3/9/2018 10:21:37 AM
So I loved your comment investors being people who hold stocks 24 hours is hilarious... Thanks for your excellent commentary and discourse on capitalism, patriotism, and family all important "isms"!

Ray Weldon on 3/9/2018 10:37:46 AM
EXCELLENT COMMENTARY--I'M GLAD I SIGNED UP FOR YOUR NEWSLETTER A FEW DAYS AGO. WE WATCH YOUR PROGRAM ON FBN AT 4 P.M. (MST) EVERY DAY. GREAT SHOW.

THOMAS W. ANDERSON on 3/9/2018 10:48:31 AM
Life is GOOD, thank you FBN, Charles, we est dow 26,000+ next week, or before end of 3rd week of March.

Ed on 3/9/2018 12:18:10 PM
I think you're right Ed, Thanks a lot. CP

Charles Payne on 3/9/2018 2:40:06 PM
Great Job Charles!

Brian Feinstein on 3/9/2018 1:45:14 PM
Thanks so much Brian. CP

Charles Payne on 3/9/2018 2:08:40 PM
 

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