Market Brief – Friday 12/7/18

November’s Nonfarm Payroll report came in at +155k jobs, below expectations of a +198k print. The Bureau of Labor Statistics (BLS) birth-death model showed a modest drop of -9k jobs, bringing the adjusted total to +164k jobs. The 12-, 6-, and 3-month average of jobs created are 123k, 108k, and 114k. When the job creation engine falls below 150k jobs per month, it’s a signal the economy is in the late stages of growth.

October’s payroll data was revised down, while September was revised higher, showing the number of jobs created was 12,000 less than previously reported. Average hourly earnings rose +0.2% MoM, below expectations of a +0.3% increase. The year-over-year rate of change in hourly earnings increased to +3.1%, which will keep the Fed in play for a December rate hike.

The workweek fell to 34.4 hours worked from 34.5 hours worked, which doesn’t seem like much. However, a 0.1-hour decline in hours worked translates to 370k workers being laid off, even though they just worked less. David Rosenberg, chief economist for Gluskin-Sheff, summed up the jobs report by saying, “Any time you get a payroll report that contains declines in the workweek, average weekly earnings and the index of aggregate hours worked, you know it’s a dud.”

The hotly watched OPEC meeting concluded today with a widely expected production cut. Oil price jumped on the new but struggled to hold increase.

The University of Michigan reported its preliminary survey data for December, which showed home-buying conditions fell to their 10-year lows.

One trillion of wealth was wiped out from U.S. stocks this week as Treasury yields fell. As I have previously mentioned, when Treasury yields fall, the Treasury short-sellers will be forced to sell stocks to buy Treasury bonds to cover their short positions. It appears this is playing out as I thought it might.

All major equity indices closed lower for the week, with the S&P 500 showing a ‘death cross,’ which occurs when its 50-day moving average slices down through its 200-day moving average. The last time the S&P 500 signaled a death cross was back in January 2016 when the S&P 500 fell 13%. The Russell 2000 performed the best today, as it was down slightly less than 2%, but it closed below a key support level that could see more selling going into next week.

Ten-year Treasury yields closed the week at 2.856% as the drop in bond yields this week led the drop in stock prices. The key technical level for 10-year Treasuries is 2.80%, which if broken, could see yields drop significantly. After closing below their 200-day moving average yesterday, 30-year yields closed just over it. Treasury yields were down across the board.

After doing nothing for months, physical gold closed at $1,249/oz and is starting to show signs of a breakout. The gold miners matched this move, which is starting to signal a move in. I still think there’s one last move down to confirm the moving averages, as a rally from this point might be premature. Either way, this a positive sign for gold moving into its next Bull market. Positions, when taken in the mining stocks, will start small and build.

Agricultural commodities closed the week higher as well and above their 50-day moving average. Earlier this week, the short-sellers were aggressive, but so were the buyers. This sector continues to remain poised for an upside breakout.