It's All About Jobs

We live in a nation that has weathered many storms and the current one forming on the horizon will also get a catchy name before it makes an impact. With the FED having received PCE figures last week, the next report up for their assessment is the May Jobs Report coming this Friday at 8:30 AM EST. Even with rising rates, Americans are still widely employed and it has helped companies maintain sales of consumer goods, so much, in fact, that it has kept prices from dropping too sharply. Even with record household debt, employment has been helping to service that debt, but Americans are really starting to feel the strain. Savings are way down from last year, SNAP benefits are getting stiffer requirements in this Debt Limit agreement, and there's no chance of stimulus in sight. So, when companies finally reach a painful point of margin compression from rising rates, they're going to cut out one of the most costliest expenses that they have: jobs.

The issues that can arise from job losses today are significant. One such issue that could have the greatest impact is the Student Loan Forgiveness program that is currently facing a Supreme Court Ruling soon and an end to the current pause as part of President Biden's broad forgiveness plan. With credit card and loan debts seeing increases in delinquencies and defaults as well as reaching all-time highs, the Supreme Court ruling could result in an acceleration of such inability to repay. This makes the strength in the jobs market a load-bearing pillar. While a number of scenarios can be imagined as to what such a collapse would look like, the fear of not knowing exactly how the actual scenario plays out is what can cause investors to evacuate.

Today's economic news is barren with the exception being the JOLTs Job Openings at 10am EST. A keyhole view into job turnover, there may be some volatility movement off this report, but most eyes will be fixed onto the Debt Limit drama as there are still committees and debate for the agreement to go through before the House votes and sends it over to the Senate, where it could face revisions. The expectation is that it will clear all hurdles even with opposition from both fringe sides of the political spectrum, but ink needs to touch paper soon lest it stoke further fear in the market.

Yesterday's candle found support at the 500 Day SMA and closed about the same as Friday's close, giving bears a case that the broader market, here the SPY SPY, is topping out. There are only a handful of stocks keeping the market up with many of them at the forefront of the AI rally that has undoubtedly created a bubble. This could go on further and continue to move up but the risk is that the longer it happens, the sharper the downturn will be when that bubble bursts. There's not much disagreement that we're extended here, but the markets do have a way of being irrational, which is usually longer than you can remain solvent.