The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Waiting
Crude and Treasury yields climbed, which hurt stocks somewhat. The movements weren’t too great however and trading was fairly quiet. The S&P opened about flat and wandered slightly positive in the morning. Then it wandered slightly negative in the afternoon, dipping a bit into the close. Capital flow was light at 88%, so investors were comfortable not moving their capital today.
I assume we are waiting for the nonfarm payrolls data (+80k est vs +57k prior) tomorrow.
That data, as always, matters tremendously to the Fed. Anything near the estimate will probably be bullish for Treasuries and therefore bullish for stocks. Anything low, or negative, will be very bullish for Treasuries but bearish for stocks. Anything high will probably be bad for both bonds and stocks.
The stock market has confidently traded as though the Fed will, at worst, keep rates where they are. It has shrugged off the hawkish noises and 3 hiking dissents from last week’s meeting. July’s NFP is the first meaningful datapoint that puts the stock market assertions to the test.
Either the market anticipated things correctly, or it did not. We shall start finding out tomorrow.
Unless the nonfarm payrolls is a big outlier, it will just be a starting point for the adjustments of both the stock and bond markets. Coming inflation datapoints will result in further, and likely larger, adjustments than what we see Friday.
The stock market expects inflation to be lower, the bond market expects different. When the inflation data show up, one market is going to have to adjust more than the other. That’s going to be significant.
See you tomorrow.
-Mike
Visdom Market Commentary
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