Stocks Retreated Prior to November NFP +227,000; Sold the Rumor and Appear to be Buying the News

Futures were initially lower after the BLS announced November Non-Farm Payrolls up 227,000, but changed direction before 9:00 am ET, a half hour after the jobs data became public.

Overall, though the number of jobs created in November was an enormous improvement from the October disaster, which was revised up by 24,000, from +12,000 to +36,000.

From the release:

Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, leisure and hospitality, government, and social assistance. Retail trade lost jobs.

Particular notice should be paid to that last, brief, four-word sentence: Retail trade lost jobs.

In a healthy, normal U.S. economy, retail would have been adding jobs in anticipation of increased holiday sales. As a whole, retail trade lost 28,000 jobs over the course of the month. That drop can probably be attributed to a small number of factors, the most prominent being the continuing shift from brick-and-mortar physical stores to online shopping. The internet has completely revolutionized how retail operates. Some companies have adapted, others are still playing catch-up, while some have given up and gone out of business, like Bed, Bath and Beyond, Big Lots, Rue21, Express, 99¢ Only, Joann, The Body Shop, and a host of restaurant chains, led by T.G.I Friday's and Red Lobster.

Accelerating the retail decline is the decimation seen in the number of shopping malls overall. according to Capital One Research, in 1986, there were some 25,000 malls in the United States. On average, from 1986 to 2017, 581 shopping malls closed every year. From 2017 to 2022, the rate of mall closures practically doubled to 1,170 closing every year.

The other factor can be described as an economy teetering on the brink of recession, a condition that's been persisting, or so it seems, for the better part of the last two years. While the Biden administration routinely fudged numbers to their benefit to make the economy appear healthier than it actually was, the coming storm from expected government downsizing at the federal level is about to usher in a recession for real, which is why stock futures headed higher as the cash session approached Friday morning.

As leading indicators go, another one to watch is the price of oil and gas at the pump, both of which are at or approaching multi-month lows. WTI crude oil this morning is trading at $67.58, a sizable decline from the brief high Wednesday morning of $70.34. Gasbuddy.com reports the average price of $3.02 for a gallon of unleaded regular, the lowest price since May, 2021, and also the last time the national average was under $3.00.

If gas isn't moving, cars, trucks, busses and other vehicles aren't either. The lower price of oil and gas is partially the cause of a glut on the global market along with slack demand, especially in developed economies.

With most of Europe already in recession, it won't be long before the U.S. finally admits that things are slowing down. For now, Wall Street is content to believe in anything supporting the narrative that the U.S. is ship-shape and sailing along toward a brighter future, rather than face the reality of a slowing economy, failing infrastructure, and advancing policies that lean heavily towards austerity and deflation.

Believe what you will, but relying on data from the Bureau of Labor Statistics - which just recently had to admit they overstated job creating by 818,000 in 2023 - has been nothing short of a freak show.

Further out along the argument of jobs and the economy is how these figures will affect the Fed's upcoming policy decision, on December 18, and whether the pace of rate cuts will proceed on a regular basis into 2025. That's an easily answered question. The Fed started with a 50 basis point cut in September, cut another 25 basis points in November, and wil likely cut by that same amount again in December and at the next four FOMC meetings in 2025 - January, March, May, and June.

Five cuts of 0.25% will bring the federal funds rate down from its current range of 4.50-4.75% to 3.25-3.50%, a more comfortable level for all involved, at par or slightly above the inflation rate, but stimulative enough to cushion recession losses and keep dis-inflation contained. If the Fed chooses to accelerate the cuts to 0.50% per meeting or continues cuts well into the second half of 2025, that would indicate deeper recession conditions and outright price deflation, which is at the top of the list of greatest Fed fears, alongside threats from crypto-currencies, Trump policies, and the BRICS.

Friday's trading may offer some indication of what's ahead. Should the morning's relaxed attitude devolve into another day of selling, the message might be that the legendary bell at the top of rallies has been rung, though there's always a "Santa Claus" rally to brighten spirits before year's end.

If the market considers a recession, job losses, and government austerity a recipe for higher stock prices - how could they? - then the bubble still isn't ready for popping. The remaining 16 trading days in 2024 ought to be interesting, but even more so, what happens in January is sure to be enthralling.

At the Close, Thursday, December 5, 2024:
Dow: 44,765.71, -248.33 (-0.55%)
NASDAQ: 19,700.72, -34.39 (-0.17%)
S&P 500: 6,075.11, -11.38 (-0.19%)
NYSE Composite: 20,157.44, -31.16 (-0.15%)