Why Stocks Hated the May Nonfarm Payroll
When the US Department of Labor announced its blockbuster May nonfarm payroll showing a 280,000 gain, stocks behaved like the world had just ended.
The 32,000 in March and April upward revisions didn?t help either.
You would think data showing that the economy is improving much faster than many realized would be positive for ?RISK ON? equity investments.
It wasn?t.
Now, the laser focus is on the bond market, which is collapsing globally. The complete disappearance of liquidity is exacerbating the moves.
Bond traders are now hyper sensitive to any news of a stronger American economy, which will soon lead to higher interest rate rises by Janet Yellen?s Federal Reserve.
A world is ending, but not the one you think. The zero interest rate regime on which we have all become heavily addicted over the last eight years is about to go into the history books.
Welcome to the looking glass world of investment these days. Good new is bad news and bad news good.
Players are in a manic depressive mood, expecting the economy to plunge into recession one month, and then discounting a robust recovery the next.
Then there?s Greece, which threatens to default on its debt on alternate days, and then offers to pay on the others. This has prompted the Euro (FXE) to undergo more gyrations than a circus contortionist.
Not a friendly environment for a trader. Sturm und drang with no net movement in the indexes doesn?t pave the road to trading riches. Even staying long volatility (VIX) is not working, unless you have the fastest finger in Chicago.
This is why I am keeping the Mad Hedge Fund Trader model trading portfolio to an absolute minimum bare bones of positions, a single 10% weighting in the S&P 500 that I snapped up at the Friday lows. And even that one has me edgy.
After polling many of my most loyal, long-term readers, I learned that they would rather see a small number of great trades than a large number of positions that include a few losers.
So, cherry picking it is, at least, for now.
To say that the nonfarm was fantastic is something of an under statement.
Private nonfarm jobs jumped by a dynamic 262,000. High paying professional and business services employment increased by a runaway 63,000. Leisure and hospitality ramped up to 57,000. Health care picked up 47,000.
The big loser was mining (coal, gold, silver), which shed 17,000 jobs. Headline unemployment held steady at 5.5%, while average hourly earnings rose by 0.3%.
It was almost a perfect report.
It certainly reinforces my own forecast of a hot 3% GDP growth rate for the final three quarters of 2015. The question bedeviling traders and investors alike now is, ?How much of this growth is already discounted in today?s prices??
You almost wonder if stocks are tired of going up, which have been appreciating for more than six years. Stock buyers need a new story.
With a discount Euro beckoning, it sounds like this summer will be the best ever to take a long vacation.
