Stocks Retreat as Strong Job Report Dampens Rate Cut Hopes
Stocks Retreat as Strong Job Report Dampens Rate Cut Hopes
By:JJ Kinahan
U.S. stocks pull back as the jobs report shows a strong economy and dims rate-cut prospects
- The jobs report shows a strong economy and dims rate-cut prospects, prompting a market reversal and increased caution.
- Earnings season slowdown and overvaluation concerns hint at potential market correction ahead.
- Rally in gold, bonds, and rising volatility suggest market may be approaching a tipping point.
Friday witnessed a reversal in the stock market's trajectory, as gains earlier in the day gave way to declines by close.
The S&P 500 experienced a 0.65% drop, contributing to a weekly decline of 0.3%, while the Nasdaq Composite fell by 1.16% on Friday and 1.2% for the week. Despite these setbacks, both indices boast year-to-date gains exceeding 7%.
The release of Friday's job report revealed stronger-than-anticipated numbers, underscoring the economy's resilience and diminishing the likelihood of an interest rate cut before summer. This week promises a flurry of economic data, including the Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales figures. Tomorrow kicks off with the CPI, with forecasts predicting a 0.3% month-over-month increase in Core CPI and a 3.7% year-over-year rise.
Earnings reports coming
Earnings reports from several companies are also on the agenda this week, with Oracle (ORCL) leading the charge after Friday's market close. Subsequently, investors will turn their attention to Dick's Sporting Goods (DKS), Dollar General (DG), and Dollar Tree (DLTR).
As earnings season nears its conclusion, projections indicate first-quarter earnings growth of 3.4%, a decline from December's forecast of 5.6%. FactSet data suggests consensus forecasts anticipate an 11% full-year earnings growth following a meager 2% in 2023.
Of particular interest are the growth rate forecasts, with the market currently trading at 21 times forward-looking earnings, surpassing the five-year and ten-year averages. This suggests stocks may be overvalued relative to historical norms. Any downward revisions or earnings misses could precipitate a market correction towards historical valuation averages.
Gold surges
Several indicators hint at a potentially overextended market, including the rallying of gold and bonds. Gold surged by 5% last week and has climbed 9% since February 14, while the yield on ten-year notes dipped below 4.8%.
Both gold and bonds, typically viewed as safe havens, have witnessed notable inflows. Furthermore, market volatility has shown signs of an uptick, with the CBOE Volatility Index (VIX) rising over 7% pre-market trading to 15.80, indicating a cautious sentiment among investors.
Conversely, bitcoin continues its ascent, surpassing $72,000 in premarket trading, thereby driving up related stocks like Coinbase, MicroStrategy and Robinhood. As the week unfolds, attention will remain fixed on the interplay between gold, bonds, and volatility. While calling a market peak remains a precarious endeavor, discernible signals suggest the rally may be losing momentum. In navigating these dynamics, adherence to investing plans and long-term objectives is paramount.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.