The market is rallying again in early trading after a much better jobs report than the consensus was looking for. Nonfarm payrolls for August fell 54,000 but that was far less than the 120,000 that was expected. Moreover, private payrolls rose 67,000, which was considerably stronger than the 44,000 expected gain.
With many participants leaning bearish heading into this report, the market rallied strong on the better than expected news. Then came the ISM Services Index report for August, which was a bit light at 51.5 vs. 53.0 consensus. That took a little steam out of the rally, but we are still up nicely as of this post.
Other service sector reports coming out around the globe include the eurozone PMI Service Index, which came in at 55.9, and China's PMI Service Index for August which rose to 57.6.
Asian markets were higher overnight, and Europe is higher this morning; the dollar is lower while the euro is higher; oil prices are lower to $73.75 and gold is down near $1240; the 10-year yield is rising further, reaching 2.71%; and the volatility index (VIX) is down -2.9% to 22.50.
Trading comment: The S&P 500 rallied above the 1100 level briefly, but after the ISM survey it dipped back below that level. As we are ahead of a holiday weekend, I expect volume to taper off as the day wears on as people head out early for Labor Day weekend. I have nothing special planned, in case you were wondering.
This week's rally is a textbook case of bearish sentiment become too pervasive, and setting up the market to rally on any hint of good news. I still think there are a lot of funds leaning bearish out there, and if the market continues to rally, performance anxiety will quickly set in. Many of the leading stocks I talk about have rallied to new breakout highs, and look attractive on any pullback. Good luck.
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