Yesterday was one of those sessions that all bull market rallies need from time to time to simply to test resolve and shake out weak hands.  Major indices closed off the lows of the session suggesting smart money went to work. (There are some delicious values being created, especially in technology, but high Beta names are the worst to bottom fish for those with queasy stomachs.  Heck, even those with cast-iron stomachs can move too early.)

Still, there are still areas of concern.

I’ve been pointing to market breadth for several reasons, including a broad rally is most desirable and has the most potential to continue. 

Of course, there were more decliners and down volume than advancers and up volume, but the milestones were ugly.

NYSE

• 49 new highs
• 517 new lows

NASDAQ

• 35 new highs
• 183 new lows

The S&P 500 is fractured as well as 40% of the index is in the red for 2018.  Moreover, there has been severe carnage in many stocks (for those that are superstitious of looking for quirky investment approaches staying away from any company that begins with a “W” has been wise).

• 209 stocks are lower 2018
• 58 stocks are down more than 10%
• 40 stocks are down more than 20%

Bond Yield Scare

Although higher yields triggered selling, a three-handle has never been associated with stock market tops in the past.

10 Year Yield

 

Be that as it may, there are glaring areas in the economy that are problematic and won’t improve with high interest rates. Stocks associated with housing and homebuilding were already taking it on the chin, but the selling has picked up speed.

Home Construction ETF (ITB)

All eyes on the jobs report and on wages this morning.  Anecdotally, and connecting the dots from other data sources, it leads me to believe median wages could increase more than 3% year over year.  That should be great news, but in February, the hint of higher wages on Main Street scared the heck out of Wall Street.

So, can more jobs, higher wages and a higher stock market all co-exist or would that be too much winning?   I think the answer is yes, but it remains to be seen.  Look for a lot of head fakes after the report.

Today’s Session

The headline number fell flat of expectations and well below what I thought was possible. That said, I think revisions over the next two months will take the September 134,000 number north of 200,000.  Note: the revisions to July (165,000) and August (270,000) came to +87,000.

The report should be music to the ears of Wall Street, as 2.8% wage growth is not too strong, but it is strong enough to maintain consumer spending trends.

The biggest question is how the Fed will interpret 3.7% unemployment as labor force participation increased at a slower pace than we modeled.

Dirty Fingernail Job Growth Continues

Goods Producing Jobs the Experts said were gone forever:

• Construction 23,000 / 315,000 past year
• Manufacturing 18,000 / 278,000 past year
• Mining 6,000 / 53,000 past year

Comments

Charles, always on the money, we thank you for stating the truth & facts. We the dirtyfingernail hard working taxpayers USA citizens have PRIDE, INSPIRING growth & confidence again. Our numbers are growing &trades are finally being taught, apprenticeships and vocational training PROGRAMS. Small business, we are the 20% of jobs numbers, but doing 80% of the work being done right, not easy. Thank you Charles PAYNE, FBN. THANK YOU PRESIDENT TRUMP. VOTE KAVANAUGH IN, AND ADD ANOTHER PRES TRUMP, there are at least (2) two that sleep 70% of the time ,supreme court is in session . You know whom she and he are . J on 10/5/2018 10:17:53 AM

Charles, I saw a very interesting email from a friend this morning which suggested a position for Justice Kavanaugh should he NOT be appointed to the Supreme Court: Attorney General. OK. This may WELL have been in jest, but? And one would have to keep in mind that this would STILL require Senate approval...and that appears to be ANYBODY'S guess right about now in either appointment. James Warlin on 10/5/2018 1:21:23 PM

Thank you Charles PAYNE, congratulations on new time for show 2PM. We still believe that "YOU, ARE THE MAN" , ( best person) to take over the Stuart Varney morning airways. Please tell Murdock , you sold the movies rights, NOW , Finnish the 21st century financial institution updates, PLEASE Let Stuart Varney bow out , relaxed, job well done, & a Microsoft millionaire & enjoy his grandkids, & children by moving out of high SALT state, just relaxing & retirement in Tennessee, or elsewhere that president Trump has made great For All again.. Ed on 10/5/2018 2:49:52 PM

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