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History Doesn't Always Repeat But it Always Rhymes

Stock Market Update Friday February 2, 2024 History Doesn't Always Repeat But it Always Rhymes. Once again, the government has released a nonfarm payroll report that appears incongruous when juxtaposed with other data. According to the Bureau of Labor Statistics 353,000 jobs were purportedly created. However, discrepancies arise as the household survey fails to align with the establishment survey, which forms the basis for the nonfarm payroll figure. Furthermore, the data contradicts reports from ADP, Challenger job numbers, and individual company layoffs. Despite these inconsistencies, the market often reacts strongly to this data, These effects are expected to subside in the coming weeks. Last Year February 3 , 2023 NFP report, 517,000 new jobs were created versus expectations of less than half that. The chart below shows the SPY last year.

New all-time highs are bullish, yet we observe negative divergence once more. Currently, this is merely a condition, evidenced by the Russell 2000 Index's decline despite substantial gains in the Nasdaq and the S&P500. Similar to other divergences, breadth divergences may require considerable time before they materialize as significant factors. A robust breadth is far more indicative of bullish sentiment, and a single day of weak breadth does not necessarily pose a concern. Naturally, this warrants close monitoring in the weeks ahead.

Last night's tech earnings tilted sentiment toward bullishness, with Meta, Amazon, and Apple all surpassing expectations. However, this optimism may be short-lived for those solely fixated on Apple's reported earnings, neglecting its anticipated future performance. Apple's flat forward guidance, coupled with its ambiguous nature, suggests that meeting those expectations will require a new innovation or luck.

However, the less popular names in the tape, i.e., smaller-cap stocks and companies away from tech, were under pressure along with most anything that wasn't an equity investment. In the afternoon, the market ramped higher, led by a gain of just over 1.5% for the Nasdaq.

Away From Stocks: A beat for January payrolls report helped push 2- and 30-year Treasury yields higher by 16 and 12 basis points, respectively, to 4.36% and 4.22%. This occurred as ping-pong price action persisted within the so-called risk-free asset class ahead of Fed Chair Jerome Powell’s appearance on 60 Minutes Sunday evening. Stocks rose by 1.1% on the S&P 500 and 1.7% on the Nasdaq 100, while WTI crude tumbled to $72 a barrel and gold slipped to $2,037 per ounce. The VIX remained just below 14.


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