INTRADAY ALERT: June jobs report incrementally dovish = incrementally positive for stocks

INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks
INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks
INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks
INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks

THIS INTRADAY ALERT IS SENT SOLELY TO SUBSCRIBERS OF FS INSIGHT

Today’s June job report was inline, despite a headline beat of jobs added at +206k vs +190k consensus. Offsetting this is unemployment rate rose to 4.1% (+0.1%) and prior month revisions were negative -111k. That is a big number.

  • To us, the message is the labor market is slowing. Previously, the Fed was reluctant to reduce interest rates, despite the softer inflation, because of the perceived strong labor market. This is less and less the case, arguably, given the softening of jobs.
  • Govt accounted for most of the upside in jobs (see below) this month as private payrolls came in far short at +136k vs +160k. That is what markets will more focus on.
  • Govt added +70k jobs compared to estimates of +45k. Is the gov’t jobs adding more jobs than expected a reason for the Fed o stay hawkish? Probably not.
  • The estimated number of Fed cuts in 2024 is now over 2.0 and as we noted, we expect this figure to creep up in coming months.
  • The next key data point is June CPI released next week 7/11. If this is another soft reading, there is a possibility of a Fed cut at the July FOMC meeting.

BOTTOM LINE: Jobs report incrementally dovish = incrementally positive for stocks

Overall, we think this is supportive of stocks short-term.

  • Interest rates are down.
  • Fed has more reasons to be dovish compared to their stance after the June FOMC meeting
  • Fed has a playbook for dealing with a softer jobs market = turn dovish
  • We are near-term dip buyers

Our strategy recommendations remain, we stick with what is working:

History also shows stocks strong in first half, outperform in the second half. Thus, we favor those S&P 500 names which gained >30% in 1H24. These are shown below.

INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks
INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks

INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks

INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks

INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks

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INTRADAY ALERT:  June jobs report incrementally dovish = incrementally positive for stocks

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