Stock Market & Economy Recap - Sunday, June 6

Both charts continue to soar higher, showing a broad level of participation in these rallies. There are no signs of exhaustion here. And next time someone tries to tell you this rally is being led by only a handful of tech stocks, feel free to show them these charts.

Summary

The economic recovery appears to remain firmly in place. There are some signs the growth rate may be peaking, but that is to be expected. I’m watching for the shift in consumer spending from goods to services now that the economy is really starting to reopen. There is a lot of pent up demand for those services that were most affected by the restrictions. This month's jobs report reflected that, as the biggest category for job gains came from the leisure and hospitality sector.

As for the jobs report, I thought it was decent overall even though the net jobs gained came in lower than expected for the second straight month. Actually, I think it was a “goldilocks” report in that it was strong enough to show the expansion is still in place, but not too strong as to have any effect on the Federal Reserve's current policy. If net jobs gained came in at 1 million, the market might have interpreted that as a precursor for tighter monetary policy. Unfortunately, this is the environment we are in.

Earnings are still great, interest rates are still very low, the economic expansion is still in place, and there remains broad participation in the stock market advance. All this remains supportive of risk assets.

This doesn’t mean we can’t have a correction, and 2020 showed us that something can always come out of nowhere and change everything. The inflation concern is real, but there is no reason to get ahead of ourselves at the moment. Next week's CPI report will be interesting.

Next week there are two S&P 500 companies reporting earnings. For economic data, we have the NFIB small business optimism index on Tuesday and the increasingly important gauge of inflation via the Consumer Price Index (CPI) on Thursday.

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Disclosure: I own shares of CrowdStrike, Zscale, and Fortinet. I/B/E/S data is from Refinitiv.

Disclaimer: None.

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