Fri, October 4, 2024 | 10:39AM ET

Better Sept jobs = good. Port strike suspended = good. Incremental good news past 24 hours = allowing tailwinds to shine

Name: FS Insight
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Tom Lee, CFA ^AC

Head of Research

Better Sept jobs = good. Port strike suspended = good. Incremental good news past 24 hours = allowing tailwinds to shine

The Sept jobs report came in better than expected at +254k versus the Street consensus at +150k. This was a clean beat driven by restaurants (+69k) and even wages incrementally improved plus positive surprise on the unemployment rate (fell to 4.1%). The past 24 hours has seen incrementally positive news and thus, perceived risks for stocks abates and therefore, stocks can drift higher:

The jobs report is a clean beat and equally important, the unemployment rate (UER) is falling. The “bear” narrative is the labor market unravels once unemployment rates rise by 50bp, and this view was triggered in the Summer when UER rose 50bp. But the fact it is falling shows the job market remains resilient.
There were plenty of clues this could be a good jobs report given the ADP report earlier in the week as well as the continued low level of jobless claims. And the fact is the US economy remains healthy at a time when the Fed has turned dovish. The reason being inflation has fallen “like a rock.”
The port strike on hold until after the elections is a positive. This averts near-term economic noise and the risk of a longer crippling strike. This is inline with our view the strike was “short-term noise.”
This is overall positive for equities in the near-term. And we defer to Mark Newton, Head of Technical Strategy, to talk about the near-term path of stocks. For now, he sees upside given the overall market remains healthy.
But we think there are some things to be mindful of regarding seeing a larger upside move in stocks:
– first, the VIX term structure is inverted (4M futures less 1M) and it would be good to see this “uninvert”
– when this “uninverts” one could suggest the “iffy” October seasonals fully discounted
– second, markets still sensitive to inflation and economic data and Sept CPI released 10/10, or next Thu.
– third, we are not exactly oversold yet, so a “buy everything” mode is not yet in place
We caution against being outright bearish or even too cautious. This is a strong market and 2024 has amply demonstrated this with monthly gains in 8 of 9 months so far. Moreover, there are the 3 structural tailwinds:
– Fed dovish
– China launches bazooka
– cash on sidelines and deployed post-election

BOTTOM LINE: Good news is still good news

Today shows good news is good news. And the US economy remains strong and thus, the bull market remains intact.

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