Market Brief – Friday 11/02/18

Don’t get too excited about today’s jobs report even as the BLS reported +250k job created last month. What the media didn’t report is that 248k of those jobs were fictional jobs created under the self-employed birth-death model. The actual number of jobs created was 4,000.

Average hourly wages increased 3.1% YoY, sparking concerns of inflation. There are no historical correlations to wage growth and money-printing inflation, so today’s jump in Treasury yields is based on a false premise. If consumers could afford higher interest rates, then housing and automobile sales wouldn’t be decelerating. Nor would the money supply be decelerating.

What is important about today’s payroll report is the Fed will follow the inaccurate headline number and the accurate wage growth number to determine monetary policy. Investors should expect the Fed to raise the Federal Funds rate again in December.

Stocks spent most of their day down but rebounded in late trading as President Trump stated we are working on a deal with China, even though earlier in the day it was confirmed by his staff that there isn’t. With exception of the DJIA, all major indices closed below their 200-day moving averages.

Treasury yields moved higher on inflation fears from October’s wage-growth data and a second time on news of a potential trade deal with China. Wages tend to follow yields higher, not the other way around.

Physical gold traded lower, but the mining stocks moved slightly higher. The summer seasonality didn’t happen, but there is positive sentiment going into the end of the year. Provided this is a bottoming pattern, a move up should be coming soon.

Agricultural commodities also moved higher on the day under heavy volume as buyers overwhelmed sellers. A head-and-shoulders reversal pattern is about to be completed, which should send agricultural commodity prices higher.

Average hourly wages increased 3.1% YoY, sparking concerns of inflation. There are no historical correlations to wage growth and money-printing inflation, so today’s jump in Treasury yields is based on a false premise. If consumers could afford higher interest rates, then housing and automobile sales wouldn’t be decelerating. Nor would the money supply be decelerating.

What is important about today’s payroll report is the Fed will follow the inaccurate headline number and the accurate wage growth number to determine monetary policy. Investors should expect the Fed to raise the Federal Funds rate again in December.

Stocks spent most of their day down but rebounded in late trading as President Trump stated we are working on a deal with China, even though earlier in the day it was confirmed by his staff that there isn’t. With exception of the DJIA, all major indices closed below their 200-day moving averages.

Treasury yields moved higher on inflation fears from October’s wage-growth data and a second time on news of a potential trade deal with China. Wages tend to follow yields higher, not the other way around.

Physical gold traded lower, but the mining stocks moved slightly higher. The summer seasonality didn’t happen, but there is positive sentiment going into the end of the year. Provided this is a bottoming pattern, a move up should be coming soon.

Agricultural commodities also moved higher on the day under heavy volume as buyers overwhelmed sellers. A head-and-shoulders reversal pattern is about to be completed, which should send agricultural commodity prices higher.