Yesterday was another solid session that began with unsure footing after the ADP Jobs report came in significantly higher than expected. That report had a lot of holes and red flags, just like the JOLTs report.

Internal Drag

Lots of green on the screen, but new lows continue to outnumber new highs. We’d like to see wider participation and more names take out key indicators like the 20 -and 50-day moving averages.

Market Breadth	NYSE	NASDAQ
Advancers	2,140	2,987
Decliners	836	1,472
New Highs	27	84
New Lows	76	123
Up Volume	3.26 billion	3.16 billion
Down Volume	1.09 billion	1.40 billion

Still, it was an impressive session that got the S&P 500 back above 4,200. It feels like the market is on launch, even though it has been making steady gains since October.

Manufacturing Breakdown

The Institute for Supply Management (ISM) Manufacturing Report came in at 46.9 against the consensus of 47.0.  The main story is about contraction.

The overall economy contracted faster for six months and manufacturing faster for seven months.

The news is helping to cement the consensus of no cut at the next Federal Open Market Committee (FOMC) meeting. That could all change depending on this morning’s jobs report.

Also, watch crude oil, which rallied almost 3%. There is a big Organization of Petroleum Exporting Countries (OPEC) meeting on Sunday that could move the needle.

Portfolio Approach

We are adding a new position this morning in Industrial to our Hotline Model Portfolio.

Today’s Session

The jobs report came in much higher than expected and the prior month was revised higher.

Data from the Household Survey is moving markets.

Household Survey

• Employed -310,000
• Unemployed +440,000
• Labor Force +130,000
• Unemployment Rate +0.3 to 3.7

The spike in unemployment is what the Fed wants most from this report.  In fact, Powell has argued this rate hiking cycle doesn’t have to have the typical job losses associated with aggressive Fed tightening.

It will be very impressive if this opening move holds. If so, then note, the train has left the station and is picking up steam.

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