EmailThe S&P 500 futures suggests the index at the open will more than regain yesterday's losses. A solid July jobs report has certainly helped, but futures were up even before the release.
July nonfarm payrolls increased 163,000. This was up from a revised 64,000 June gain and well ahead of expectations of about a 100,000 increase. It was the strongest gain since February.
There is nothing particularly unusual in the component data. The workweek was unchanged and hourly earnings were up 0.1%. Private payrolls were up 172,000 as government jobs dipped slightly again. The unemployment rate inched 0.1% higher to 8.3%.
These are good data. Not great, but good. The market reaction is difficult to read. Not too long ago, weak economic data was seen as having a very large silver lining - it increased the chance that the Fed would embark on another round of quantitative easing. Now, with the Fed having done nothing and the next meeting six weeks away, it appears that good data is good data again.
Even so, the market reaction is impressive. From a fundamental standpoint, the total lack of action from the Fed and the European Central Bank is more important than an extra 63,000 on July payrolls. Nevertheless, the S&P 500 is now poised to open Friday about where it closed Tuesday, just ahead of the Fed meeting. All that fuss about nothing (sort of).
The market is showing impressive resilience, particularly for the summer months. Volume is light, however, with what appears to be too much influence from black boxes for our taste. The weak outlook for profits for the third and fourth quarters will become more of a focal point in the months ahead, but for now, the S&P is poised to continue the June and July recovery following the downturn in May. The S&P 500 index will open this morning up about 9.5% on the year, but still a touch below the 1422 high of 2012 achieved in early May.
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