Markets climb higher while Treasury yields retreat

Dow jumped another 222, advancers over decliners better than 6-1 & NAZ went up 184.  The MLP index stayed near 253 & the REIT index advanced again, up 8+ to the 349s.  Junk bond funds were strongly in demand again & Treasuries continued to see heavy buying which reduced yields.  Oil pulled back 1+ to 81 & gold finished up 8 to 2002 (more on both below).

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Today's market reaction to the jobs report comes down to a simple premise: bad news is good news, as long as it isn't too bad.  Stocks rallied sharply after the Labor Dept said nonfarm payrolls rose by 150K in Oct — 20K fewer than expected but a difference attributable pretty much completely to the auto strikes, which appear to be over.  For the Federal Reserve, the relatively muted job creation coupled with wage gains nearly in line with expectations adds up to a scenario in which the central bank doesn't really have to do anything.  It can just continue to let the data flow in, without having to move on interest rates as it evaluates the impact of its previous 11 hikes.  Markets reacted in more ways than one to the report.  Traders in fed funds futures reduced the probability for a Dec rate hike to less than 10% & now see the first cut coming as soon as May, according to CME Group tracking.  However, that cut could be the really bad news, as it likely would signal the Fed's concern that the economy is slowing so much that it needs a boost from monetary policy.  Slow, controlled growth is something the markets & the Fed are seeking in the current climate, negative growth is not.  Despite market pricing, it seems like cuts aren't around the corner if recent statements from Fed officials are any indication.  Fed Chair Jerome Powell said Wed that cuts have not been a part of the conversation among policymakers.  “It seems like that’s still a ways off in my mind,” Richmond Fed President Thomas Barkin said today.  “You could imagine scenarios where demand comes off and you have to do something. You could imagine a scenario where inflation is starting to settle and you want to lower real rates. Both of those imaginary things still feel pretty far out the distance.”

Bad news for the economy is good news for the stock market ... as long as it doesn’t get too bad

Walmart (WMT), a Dow stock & Dividend Aristocrat, touched an all-time high today, as investors bet that the discounter will outmatch retail rivals& draw shoppers throughout the holiday season because of its reputation for value.  Its stock hit a peak of $166 today, the highest since WMT first began trading on the NYST in 1972.  WMT, known for its giant stores & low prices, has put up strong results over the past year even as US consumers have pulled back on discretionary purchases like new outfits, flat-screen TVs & more.  It is the largest grocer in the country & makes more than ½ of its annual revenue from groceries, a category that shoppers need, even when inflation or a recession stretch their budgets.  Sticky inflation — particularly in categories like food & household essentials — has also become an opportunity to get new or less frequent shoppers to come to its website & stores.  CFO John David Rainey said the company has attracted more grocery shoppers from households that make more than $100K.  As those shoppers come to its stores and website, they're seeing ways that WMT has tried to step up the customer experience to keep up with more polished, tech-savvy rivals.  WMT has also defied another dynamic in the retail industry.  As Covid pandemic gains fade away & most companies post online sales declines, it has put up double-digit e-commerce gains for its US business in the past 2 qtrs.  WMT is scheduled to report its fiscal 3rd-qtr results on Nov 16.  The stock was off 84¢.
If you would like to learn more about WMT, click on this link:
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Walmart shares hit all-time high, as retailer’s value focus attracts shoppers and investors

The job market continues to show signs of cooling, but alarm bells aren't ringing just yet, economists said.  The US economy added 150K jobs in Oct, the Bureau of Labor Statistics reported.  That was less than expected & a “substantial slowdown” from the 260K monthly average so far in 2023, said Julia Pollak, chief economist at ZipRecruiter.  The unemployment rate rose to 3.9% in Oct, from 3.8% in Sep, the BLS said.  Average hours worked declined slightly to 34.3 a week, the “very bottom end of the range” typical for good economic times, Pollak added.  “There’s almost no exception in this report: Every indicator suggests a slowing, slackening labor market,” she continued.  Yet, there's cause for optimism.  The job market has proven resilient in the face of economic headwinds & remains healthy in historical terms.  “The days of explosive growth are gone, as the labor market shifts into healthier and more sustainable territory,” said Noah Yosif, lead labor economist at UKG, a payroll & shift management company.  “All indicators point to a continued lull in the immediate future. It’s a slowdown, not a collapse.”  Recent labor trends mean workers & jobseekers have “lost considerable leverage” relative to the recent past, Pollak said.  For example, 18% of new hires reported getting a signing bonus in the 3rd qtr, down sharply from 28% in Q2, according to a recent ZipRecruiter survey of new hires.  58% of new hires increased pay in their new roles, down from 65% the prior qtr.  “Even though historically [workers] are still doing well, I think many are comparing their lot to the way things were a year or two years ago, and they’re feeling a pinch,” Pollak said.

Cooling job market no reason for panic yet, economists say: ‘It’s a slowdown, not a collapse’

Gold rose after US jobs data came in weaker than expected, taking the pressure off the Federal Reserve to tighten policy further.  Nonfarm payrolls rose 150K in Oct, below the estimate, while the unemployment rate unexpectedly rose. The $ & Treasury yields extended losses following the print, while gold rose as much as 0.9%.  The data points to a cooler-than-expected labor market, which will ease the pressure on the Fed to raise interest rates again.  Earlier this week, the central bank hinted its most aggressive tightening cycle in decades may have finished, sparking a rally in risk assets.  Lower interest rates are typically good for gold, which bears none.  The precious metal has held up well to surges in US bond yields that dim its allure, in part thanks to record demand from central banks.  Spot gold rose 0.9% to $2003 an ounce.  It finished the week slightly lower, after gaining for 3 weeks on haven demand amid increasing tensions in the Middle East.  The Bloomberg Dollar Spot Index fell 0.7%.

Gold Rallies After Soft US Jobs Data Takes Pressure Off the Fed

Oil was set for a 2nd weekly loss as the Israel-Hamas war remained contained & clouds appeared on the demand horizon.  Global benchmark Brent pared some of that decline today as US jobs data missed expectations, bolstering the case for a pause in Federal Reserve interest rate hikes.  Wider markets also rallied as the $ slid.  Israel said its troops encircled Gaza City & that a cease-fire wasn't on the table, even as Pres Biden called for a pause to allow time to free more hostages.  Crude has mostly given up its war premium as the conflict hasn't endangered supplies from the region, the source of about a 3rd of the world's oil.  That's brought demand concerns back to the fore.  Factory activity in China, the biggest importer, moved back into contraction last month, while US crude stockpiles are rising.  Brent for Jan settlement added 0.8% to $87.57 a barrel.  Futures are down 3.2% this week.  WTI for Dec climbed 1% at $83.28 a barrel.

Oil Heads for Second Weekly Drop as Israel-Hamas War Contained

Investors were happy to hear Powell's comments after the Fed meeting & stocks rallied.  Dow rose 1650 this week which pretty much recovered the Oct decline.  However 2 wars, high inflation & high interest rates are among the many problems that persist.  The bulls will have to work to extend this rally.

Dow Jones Industrials