Jobs Report Provides Positive Sentiment, But Inflation Data Looms

Markets were mixed after a late week rally.

The reaction to the Jobs Report was negative initially, but equities continued with the move higher that started on Wednesday. Softer wages and above-consensus unemployment rate in the report stroke a dovish tone with the market that higher interest rates for longer could be overblown. The futures on the Fed Funds Rate moved higher on Friday to an 86% probability of no rate hike in November from 72% on Thursday. In addition, the probability of no rate hike in December, the last Fed meeting for the year, remain at 57%.

This week could change things depending upon the inflation results released this week.

The consensus is that both CPI & PPI decreased in September. More good news on the economic front this past week showed that Job Openings jumped in August after dipping for 4 consecutive months. Both initial and continuing claims dipped last week, and remain at 7-month lows. Factory Orders also jumped in August, but this stands in stark contrast to Consumer Credit, which plummeted in August. If that becomes a trend, it would indicate a weary consumer. Futures overnight have shifted lower as news broke this weekend that groups of Hamas militants attacked Israeli towns along the Gaza border. Oil is trading higher as a result and markets are likely to be choppy this week.

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