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Market Brief – Friday 12/6/19

Stocks surged this morning after the Bureau of Labor Statistics reported +266k jobs were created in November followed by +41k of revisions for the prior two months. The return of +54k striking GM workers helped boost the report along with the reporting period from last month is five weeks instead of the typical four weeks between the Nonfarm payroll reports.

The unemployment rate tagged its 50-year low at 3.5% as average hourly earnings came in slightly below expectations at +0.2% with the year-over-year growth rate at +3.1%. The average workweek remained unchanged.

The Household survey tossed some cold water on the report as it reported a +83k gain in jobs for November with one-in-five jobs being full time. So far, the leading economic indicators have been moving in the opposite direction of the Nonfarm payroll report. The S&P 500 rallied close to its all-time price high and while Treasury yields initially surged on the report, they began to pare their rise in early trading.

In overnight trading, Japan’s household spending in October fell -11.5% and -5.1% from a year ago. Germany’s industrial production fell -1.7% in October against expectations of a +0.1% increase. Canada reported -71.2k jobs lost in their monthly payroll report.

The New York Fed accepted bids for $72.8 billion of overnight dollar loans and purchased $7.501 billion of Treasury Bills against offers of $23.172 billion, making the offer oversubscribed by 3.09 times.

Wholesale inventories rose +0.1% and wholesale sales fell -0.7% in October.

The preliminary University of Michigan Consumer Confidence survey surged higher in December as current conditions rose while expectations remained flat. Inflation expectations fell to 2.4%, while 5-year inflation expectations dropped to 2.3%.

Stocks ran up near their all-time price highs where they spent hours barely moving until about fifteen minutes before close where sellers emerged. After buyers came in to bring Treasury yields down, sellers arrived to bid yields back near their high for the day. In the past three days, Treasury yields have left open gaps from the closing value of their prior night, which means yields will need to fall to fill those gaps and the others near their all-time lows. Oil stocks outperformed after OPEC agreed to a small production cut.

The Federal Reserve is scheduled to meet next week and after the November Nonfarm payroll report, it is unlikely the Fed will further cut rates. Based on the strong payroll report, investors should prepare for President Trump to proceed with the last round of tariffs against China that are scheduled for midnight on December 15th.