October 8, 2021
Good morning,
Following the theme of Wednesday’s note: was yesterday’s very broad, globally strong rebound rally the start of a Q4 rally, or the B-side of the recent spike in volatility. I suspect those two drivers are not mutually exclusive but I would attribute more to the backside of volatility than start of a year-end rally. I’m happy to be wrong in this case.
Regardless of the attribution analysis, today’s market driver is this morning’s September employment data. The headline payrolls number increased by 194,000 vs 500,00 expected. First glance looks like a miss but prior month revisions put this month’s number closer to expectations at 363,000. Still light but perhaps goldlocks-ish – a green light to the Fed for November taper, but rate hike talk off the table for now. The unemployment rate fell to 4.8% vs 5.2% which was a larger decline than expected – some inflation concerns there possibly.
Net, net – the early reaction by the markets is choppy (up and down) but largely unchanged in stock and bond future post-report. I wouldn’t be surprised if stocks interpret this month’s employment data dump favorably (rate talk postponed it would seem) and end the day in the green for the forth day in a row.
Have a great weekend – see you Monday.
Be well,
Mike