Today the Non-Farm Payrolls Report (NFP) aka the "Jobs Report" came in significantly better than expected.
After a sharp late day pullback yesterday, the SPX futures leapt higher by about 12 points. The US dollar initially sold off as the market futures rallied and gold initially rallied. However, shortly thereafter the Dollar began to rally strongly with equities futures and gold began to sell off sharply.
After the open, equities and the dollar continued to rally as gold and then crude oil sold off sharply. Since then the dollar has continued to rally and equities have fallen back to break even or below. Gold is off 3.75% and near its lows.
We saw a similar bout of market action a few months ago on a less bad than expected jobs report. The dollar rallied sharply together with stocks in a signal that seemed to anticipate a strong economic recovery which would support both a rising stock market and demand for the dollar. That thrust did not take hold for the dollar and instead the "dollar carry trade" came in vogue.
I think that the sell down in stocks after the initial rally may be due to the unwinding of some of these speculative dollar carry trades. I note that the decline is centered on some of the bubbliest assets such as gold, AAPL and AMZN. The sectors that one would look to outperform in a renewed thrust forward in stocks are in fact performing well even as the rest of the market trades near its lows: IWM +1.68%, Transports + 1.43%, XLF +1%, SMH +1%.
Could the market be setting up for a "growth" profile run? From a contrarian perspective, it's a strong possibility since it is the least anticipated outcome. Certainly inflationist and deflationist outcomes are given far more weight in today's market. As we know, markets tend to punish the consensus view--eventually.
Of course only time will tell if this is a one day wonder or the start of something. But today's action is a good reminder that we always need to be ready for counter to anticipated action.
Please share your observations, comments and thoughts about this most interesting market action.