With many market players taking an extended holiday break it is going to be a thin session of trading but the June jobs report at 8.30 am ET is likely to product a reaction.
June payrolls are expected to show growth of 180,000 jobs and the unemployment rate is expected to stay at 3.6%. Last month job growth was just 75,000 versus expectations of 180,000 but the market exploded higher on the bad economic news as it raised hopes that the Fed would cut interest rates at its July meeting.
If today's jobs news is weak again the likelihood of a July cut will be a near certainty. It may even raise hopes of a half-point cut rather than a quarter-point drop.
The market has been celebrating the potential for rate cuts for a while now and has consistently shrugged off weak economic news. Even concerns about a trade deal with China have had little negative impact as the market is comfortable that central banks around the world will keep rates at the lowest level in years.
What market players have to watch for is a shift in the reaction to economic news. Concurrently bad news is good because it guarantees friendly central bankers but if concerns about the effectiveness of monetary policy starts to grow then it is going to be a major upheaval for the market.
There are no indications yet that the market is losing its faith in the power of the central banks to support the indices, but that is what we need to watch for. There will be a particularly good test of how much confidence the market has in the Fed when earnings season starts in about a week. Expectations are low but there is sure to be some warnings due to trade war pressures and the market reaction will be very instructive.
The jobs news this morning will be a good test of the level of confidence the market has in central banks. If bad news continues to receive a positive response then the trend will continue but if that dynamic shifts it is going to be a very tricky market to trade.
https://realmoney.thestreet.com/investing/is-bad-economic-news-still-a-market-positive--15010670
2019-07-05 11:53:47Z
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