It was a slow start yesterday, as the stock market struggled to find its footing, but a gradual rise finally sparked a surge of buying into the close.  

The Incredible Consumer

Consumer Discretionary (XLY) led the way, and it wasn’t just Amazon (AMZN) that had a stellar session. I’m always pointing out that “The consumer” is really the wealthiest 10% of households doing all the buying. Still, there is something to be said about all consumers stepping up. Equal-weight discretionary is crushing equal-weight staples, which were advertised as the place to be under the tariff regime.

Lots of green on the screen, with the notable exception of software stocks back on their heels, as the Artificial Intelligence (AI) threat isn’t going away. Drug stocks were also under a fair amount of pressure.

The Green Carpet

It was a green carpet, as investors focused on quality, small-cap, and revenue-generating names.

The S&P 500 (SPX) chart is very appealing. And it has room to run with a breakout to a new high.

Jobs Report

Watch the Health Care (XLV) Sector today when the jobs report is released. It's been the biggest driver of employment, but job openings in the sector collapsed in the recent JOLTs report.

I’m also watching participation closely. More than six million people who are not in the labor force want a job. Will they hit the bricks and look for one?

If you add them to the unemployment rate, we are approaching 8.0%.

Today’s Session

The jobs report was weaker than consensus, but not so weak. There should be an increase in recession calls, and be that as it may, Powell’s Fed will still look for ways to slow walk rate cuts.  Meanwhile, there is now a 12% chance for a 50 bps cut in September.

Rate Cut Probability

Labor Market in Stress

With revisions, June has flipped to job losses for the month.

On the inflation front we are hearing from companies about troubles passing on higher cost, we saw US consumer goods as percentage of imports plunge, and the Fed’s own Beige Book stated it was hard to pass on higher prices.

Powell needs to see the writing on the wall.

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