Stocks Stay Neutral On Huge Jobs Beat While Gold And Crude Suffer As Greenback Soars

Today’s U.S. jobs report served to bolster expectations that the Federal Reserve will raise interest rates at their next meeting six weeks from now.

The expectation was that the U.S. would gain about 180,000 jobs in the latest Department of Labor report. The truth was 50% more than that as October’s job gains clocked in at 271,000.

That number drags the prior two months back to the mean more or less. September's job growth was revised down to 137,000 from 142,000. The August numbers were revised up to 153,000 from 136,000. That puts the average for August, September and October at 190,000 per month.

The unemployment rate dropped to 5%, a target the Fed ha held tightly to for some months. The bad news in the report was a still lagging and sagging workforce participation level.

Equities reacted with a bit of a shrug on a day when it seemed every time there was a profit taker or position liquidator of some sort a new buyer stepped in with fresh money. The losses on the S&P 500 were restricted mainly to utilities and index components involved with crude oil. The Dow was pulled lower by elements in the banking sector.

Our thought is that the equities are already well beyond thinking about the first rate hike and will begin to trade based on speculation about the second rate hike.

The dollar is up about 5% since early October. Today, it strengthened on the U.S. jobs report. The euro reciprocally weakened and euro stocks were up as investors there licked their chops at the thought of the ever-stronger dollar, which will buy more European goods and services.

West Texas Intermediate is trading in after market by 1.5%+ while Brent North Sea is down about 0.81%. Cheap oil is the great strength that the U.S., Japan and Europe are pinning their near-term economic hopes on. The number of U.S. oilrigs fell to 572 this week, down six. That is almost 1000 fewer rigs in the U.S. than last year at this same time.

In late afternoon trading, gold is off more than $15, almost exclusively on the strength of the dollar. Of the other precious metals, only palladium, which had been on a serious cold streak, was up 2.00%, despite the robust dollar. 

Yields on U.S. bonds are also up. The 10-year is about to close over 2.33%. We believe, though, that paper yields, like gold – are range-bound, even if those ranges are broad and take a long time to shift through their highs and lows. 

Wishing you as always, good trading,