Apparently, a trade war started on Friday -- or so it was said -- yet the stock market acted as if there was a daisy stuck in the barrel of every trade threat. For the second day in a row, the stock market ignored the trade conflict between the U.S. and China (and other countries for that matter) and rallied around a pleasing employment report for June. It was clear to see in the futures market this morning how the employment report was the inflection point for a shift in trading sentiment.
Prior to its release at 8:30 a.m. ET, the S&P futures were down as many as seven points and signaling a modestly lower start for the broader market.
Following the release, they turned positive, and although the open to today's session was a bit tentative, the bulls soon took command of today's tape, ceding some ground only in a profit-taking retreat in the last 30 minutes of trading.
The catalyst for the upside bias was the recognition that the June employment report had a familiar Goldilocks hue to it. Specifically, it featured solid non-farm payrolls growth (+213,000) and a subdued 2.7% year-over-year gain in average hourly earnings that kept inflation worries, and aggressive rate-hike worries, at bay.
The stock market wasn't the only beneficiary of that fairy-tale theme. The Treasury market also enjoyed the not-too-hot-not-too-cold narrative. The 2-yr note yield, which is more sensitive to changes in the fed funds rate, fell three basis points to 2.53% while the 10-yr note yield, which is more sensitive to inflation, slipped one basis point to 2.83%.
Graph: Google Finance
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The O&G Research Team holds Series 65 and Series 3 certifications and are experienced traders in international financial markets.
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