All’s well that ends well – I suppose.
After an extremely rocky start to December, US equities rose for a third day on Friday thanks to a blockbuster November jobs report which helped dispel the notion that the economy may be on shaky footing amid a four-month factory slump.
The trio of daily gains comes on the heels of a disconcerting three-day losing streak, catalyzed by aggressive trade rhetoric from Donald Trump and a disappointing read on ISM manufacturing that clashed with a seven-month high on IHS Markit’s gauge.
One of the two US manufacturing PMIs has to be “wrong” and the jobs report helps make the case that ISM is “mistaken”.
It also helps that PMIs in Germany and China inflected for the better last month. ISM was the clear outlier in November:
We should note (again) that data out Friday showed industrial output in Germany slumped the most in 10 years in October. We are not out of the woods yet.
For the week, the S&P managed to eke out a small gain, thanks entirely to Friday’s jobs rally. The Nasdaq ended flat, and the Dow was still negative, despite surging 1.2% following payrolls.
The VIX fell for a third day after rising for four straight days on a combination of economic jitters and Trumpian bombast. Next week brings the Fed and the final word on whether the White House intends to move ahead with the scheduled December 15 tariff escalation.
Although his comments in London can perhaps be played down as the off-the-cuff ramblings of an irritated autocrat who is in the process of being deposed by political rivals, the worry is always that Trump views record high stocks and good economic data as an excuse to push the envelope on trade and other contentious issues.
That will be in focus over the weekend, especially now that the jobs report has reduced the incentive for the Fed to come across as dovish next week when they invariably stand pat awaiting more information.
Trump has complained about the Fed numerous times over the past several days, and it’s doubtlessly occurred to him that the upside November payrolls surprise (which Jim Cramer absurdly called the best jobs number of our lifetimes) means a dovish tilt next week is less likely.