Daily Commentary: May 03, 2024

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Market Likes the Jobs Number

Posted by Pete Stolcers on May 03

The S&P 500 will open 60 points higher after earnings from Apple and a “Goldilocks” jobs report.

PRE-OPEN MARKET COMMENTS FRIDAY – The market has been wedged between the 100-day MA and the 50-day MA and it has been waiting for a catalyst. Earnings season is in high gear, the Fed eased up on quantitative tightening (QT) and job growth is stable. The SPY is going to challenge the 50-day MA this morning and we want to blow through it.

In April, 175K new jobs were created (238K expected). That is solid, but considerably lower than the 315K reported last month. Hourly wages only increased .2% and that will reduce inflationary pressure. This was a “not too hot and not too cold” number for the market and the Fed funds futures are pricing in two 25 basis point rate cuts this year.

ISM services will be released 30 minutes after the open (52.0 expected). It has been leaking lower the last few months, but a weak number would be supportive of a rate cut so it might not matter much either way. The “bad news is good news” crowd is in control this morning.

I would prefer to see strong economic growth and a steadfast Fed. An uptick in global growth would also have helped. Combined with a gradual decrease in inflation, this would have been my preferred back drop. When economic conditions start to slip, analysts will worry that the Fed waited too long to ease and that a recession is coming. From my perspective, the reaction today is more of a “sugar high”. Europe has been flatlining and we need to see signs of growth there. Chinese stocks have been “hot”, but part of that is short covering and part of it is China backed funds buying Chinese stocks.

That is as much fundamental analysis as you will get from me. I operate in the here and now. I don’t care why the market is up, I just care about the price action. The bounce so far has been very sluggish. That tells me that there is supply to work off. We did not snap back immediately and that tells me that buyers are not as anxious as they were earlier in the year. It is also a sign of “risk off”. We want to attack the 50-day MA and we want to close well above it. That type of move will spark some short covering.

A move of this magnitude before the open typically holds. I still advise waiting for the dust to settle. ISM services is 30 minutes after the open. We’ve seen selling pressure the last month. We want more than half of the gap up to be preserved. This has been a very sticky level ($510). The post-FOMC high was $508 and that should be a support level. Ideally, it is not breached and then the market assaults the $511.50 level and gradually grinds through it.

These moves tend to settle down and preserve most of the gains in the first hour. Then they grind higher for another hour and we compress the rest of the day.

Support is at $508 and resistance is at $511.50.

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