Stock Market Update

The S&P 500 futures are are flat and are trading in line with fair value, the Nasdaq 100 futures are up 16 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are down four points and are trading roughly in line with fair value.

The June employment report did not convey a robust labor market in June. To be fair, it did not convey a weak labor market either. If anything, it conveyed a weakening labor market.

The nonfarm payrolls increase (206,000) looked good, but that strength gets watered down when taking into account that private sector payrolls, which exclude government hiring, were up just 136,000. Furthermore, there was a moderation in year-over-year average hourly earnings, and downward revisions to nonfarm payrolls for April and May combined translated to employment being 111,000 lower than previously reported.

The key takeaway from the report is that labor market conditions are softening, which will provide the Fed some cover to cut rates in September if it so chooses.