The bears got slammed on Friday as the S&P 500 (^INX) soared past the key 1600 level following a better-than-expected jobs report.
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Following a recent spate of economic data implying a US slowdown, not to mention an earnings season that can be described as so-so at best, it appears that expectations were fairly low heading into this morning's jobs report.
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Thus, the bears were caught off guard when the big headline number -- the change in nonfarm payrolls -- came in at 165K, beating the 138K consensus. Additionally, both the February and March numbers were revised up significantly.
On the negative side, average weekly work hours and aggregate earnings declined while the underemployment rate rose, but again, expectations were fairly low and traders were content to cue off the positive headline numbers.
That 165K print drove a day that can very much be described as risk-on. The small-cap Russell 2000 (INDEXRUSSELL:RUT) was up significantly, as were economically-sensitive sectors like Industrials and Materials.
We also received the April ISM Services report today, which disappointed slightly at 53.1. On the flip side, we saw sharp falls in safety plays, with utility and health care stocks (the two best-performing sectors of 2013) being notable underperformers. There was also a sharp increase in US Treasury yields as bond prices fell.
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Somewhat unusually, high-yield bonds were flat-to-up on a price basis today. This took some traders by surprise; when considering the sharp increase in yields, the conventional wisdom would imply at least a modest decline in the high-yield market. This particular sector has been on a tear as of late, and today's move, while not impressive on a nominal basis, represents an extension in momentum for a seemingly overheated sector.
In earnings news, we saw better-than-expected numbers from Automatic Data Processing (ADP), Spectra Energy (SE), and Moody's (MCO), and misses from WellCare Health Plans (WCG), Duke Energy (DUK), and Buckeye Partners (BPL). Overall though, as noted above, earnings season has not been terribly impressive and we didn't see anything to change that view.
Tomorrow's Financial Outlook There are no economic data releases on the calendar for Monday. Earnings season will continue, however, with notable reports coming from Sysco (SYY) and Tyson Foods (TSN) before the open, and Plains All American Pipeline (PAA) and EOG Resources (EOG) after the close.
Near-term market direction remains hard to gauge as lately the market's been inclined to remain stable on bad news yet jump on positive news. This trend is generating a lot of frustration among the bears, who are not seeing price confirmation of the slowdown they correctly see in economic fundamentals. This may be an indication of the low expectations referenced above, and which were perhaps best encapsulated today in this morning's pre-NFP Drudge Report headline: "How Low Will It Go?"