Bad is the New Good!

Bad is the new good!  Stocks surged on Friday with increased hopes of a Fed rate cut.  A soft jobs number was perceived as the final straw to push the Fed over the easing line.




  1.  In a relationship.  WHILE YOU SLEPT, the Trump Administration announced that the Mexican government agreed to terms regarding border security.  The agreement halted the 5% tariff that was due to take effect today.  Though the details of the deal are sketchy and even contested by some reports as having already been agreed upon prior to the tariff threat, the fact that the tariffs will not be enacted is a good thing.  Additionally, now that the tariffs are out of the way, Congress can get to work to pass the USMCA, AKA the New NAFTA, though political wrangling may put the deal off.  Stock futures rallied overnight in response to the news.


  1.  How is bad news for the economy good news for stocks? If you were pondering that question, here is the simple answer. Friday’s Non-farm Payrolls number was expected to come in at +185k jobs but only came in at a soft +75k.  Further, last month’s number was revised down and Average Hourly Earnings missed estimates as well.  All of these are signs that the economy may be losing momentum as employment is the primary driver of consumption and economic growth.  Many now believe that the weak number on Friday leaves the Fed and Jerome Powell no choice but to cut interest rates.  After the number on Friday, Fed Funds Futures pointed to an 86% probability for a rate cut by July compared to a 17% probability a month earlier.  While rate cuts are typically received with cheers from the stock market, sentiment can turn very quickly if economic numbers continue to come in on the weak side.  Diligence is warranted here!




Stock market bulls got a dose of confidence on Friday as bad economic data all but ensured that the Fed would have to lower rates…. at some point.  The buy-now-ask-questions-later strategy pushed indexes higher with the S&P climbing by +1.05%, the Dow Jones Industrial Average trading up by +1.02%, the Russell 2000 advancing by +0.72%, and the NASDAQ 100 jumping by +1.94%.  Bonds climbed on Friday and ten-year treasury yields fell by -3 basis points to 2.08%.  The 3-month / 10-year yield curve remains inverted at -19 basis points.  Fridays’ bad news and increased rate cut probability caused the US dollar to drop in value causing Gold to climb by +0.41%.




– JOLTS Job Openings report from The Bureau of Labor statistics will be released this morning and is expected to show 7.496 million job openings compared to last month’s 7.488 million.  Anything jobs-related is important now.

– In the week ahead we will get price gauges tomorrow and Wednesday with the PPI and CPI followed by Retail Sales and Industrial Production on Friday.  All of these numbers will be factors for the Fed, who will meet next week to discuss policy, so we can expect market volatility around their releases.  Earnings season is over but we will still get some releases in the week ahead.  Please refer to the attached economic and earnings calendars for details.

daily chartbook 2019-06-10

earnings releases 6_10

econ numbers 6_10


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