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A Confusing Job Report

Updated: Feb 6

BentinPartner Daily



After an initial selloff, stocks recovered to close the week in the green despite having to contend with Fed Chair Powell taking the March rate cut off the table on Wednesday during the post FOMC press conference. On the very same day and going into the meeting outcome, stocks also had to contend with the bomb shell of New York Community Bank (the bank that bought SVB) which delivered poor earnings, scrapped its dividend, and saw its stock price drop 40%, sending the regional banks sector into a 5.9% selloff which stood as the worst performance of our score card on that day. It was even a little bit surrealist to see the Fed statement being emptied from all prior mention about lingering banking risks on the very same day that New York Community Bank lost nearly half its value. Perhaps this was a sign that the Fed was taken off guard (unlikely) or eager to get observers to look away from that curve ball.

 

The rest of the week saw US jobless claims rise to three months high on Thursday with January showing the highest layoff and lowest hiring levels since 2009. But that was without Friday’s huge NFP upside “surprise” report. ZH wrote an uncompromising review of Friday’s job report, highlighting among others the gaping discrepancy between the establishment survey (NFP report of last Friday) and the household survey published earlier last week which was depicting a much grimmer job situation including with all new job creation since February 2023 seemingly consisting of part time jobs (you need many of those to make one whole).

 

While bond yields rose, the stock market rallied, led by a narrow rally in Mag 7, actually Mag5 as both AAPL and Tesla were down for the week  and “out” of the tech fest for now and as a matter fact by an even narrower Mag 3 rally as the entire 1% in the SP500 was caused by a 21% gain in Meta (accounting for 50% of the 1% gain) triggering the single largest market cap increase in a single stock ever in the S&P500 and AMZN which with a 7% rally accounted for 25% of the SP500 move on Friday. The 4.5% gain of NVDA accounted for the balance. It may not be one but that sort of price action could easily tick off the boxes as a blow-off top, considering the other considerations that are not necessarily supportive, starting with the geopolitical situation (dire), the fiscal deficits, renewed concerns for regional banks, the monetary stance and continued underperformance elsewhere.

 

The dollar surged as bond yields lost their gains for the week on Friday. US banks reported a large deposit outflow going into money market funds sending their total assets to USD6trn for the first time ever.

 

Last week, ECB President Lagarde declined to give a timeline for interest rate cuts  emphasizing that wage growth will be vital to determine the timing of the first rate cut, more likely to occur around mid-year. 

 

Two of France's main farming unions on Thursday agreed to suspend protests and lift road blockades across the country after the government announced measures the deemed "tangible progress" in the ongoing revolt against EU climate-driven initiatives.

 

 

Over the past week, the S&P500 gained 1,4% (4,0% YTD) while the Nasdaq100 gained 1,2% (4,8% YTD). The US small cap index dropped -0,8% (-3,1% YTD). AAPL sold off by -3,4% (-3,5%).

The Equally Weighed SP500 gained 0,4% (0,2% YTD), underperforming the S&P500 by-1,0%. The median SP500 YTD return closed the week at 0,2%.

CBOE Volatility Index rallied 4,4% (11,2% YTD) to 13,85.

The Eurostoxx50 gained 0,5% (3,1%), underperforming the S&P500 by-1%.

Diversified EM equities (VWO) dropped -1,3% (-3,6%), underperforming the S&P500 by-2,7%.

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,6% (3,1%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,3% (-0,8%).

10Y US Treasuries was unchanged (20bps) to 4,08%. 10Y Bunds dropped -6bps (22bps) to 2,24%. 10Y Italian BTPs dropped -1bps (12bps) to 3,82%, underperforming Bunds by 5bps.

US High Yield (HY) Average Spread over Treasuries climbed 5bps (7bps) to 3,30%. US Investment Grade Average OAS climbed 6bps (-1bps) to 1,04%.

In European credit markets, EUR 5Y Senior Financial Spread climbed 2bps (2bps) to 0,69%.

Gold gained 0,3% (-1,1%) while Silver sold off by -2,2% (-4,7%). Major Gold Mines (GDX) dropped -0,2% (-9,6%).

Goldman Sachs Commodity Index sold off by -3,5% (-1,0%). WTI Crude sold off by -5,8% (1,0%).

 

 

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Marc Bentin serves as Economic Advisor to Blue Lotus Management,

a specialist multi-manager investment firm, which seeks to provide investors a compelling alternative to the traditional 60/40 equity and bond portfolio by targeting higher returns without amplifying equity risks.


BentinPartner GmbH is Advisor to the Phi Funds AIF, an umbrella Alternative Investment Fund registered and regulated in Lichtenstein, specializing in the management of Funds focused on physical precious metals.

 

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