S&P 500 slide on non-farm payrolls revealing way weaker economy than expected, was outdone just by Russell 2000. Continuing in the "bad data are bad, and will be sold into" turn, Nasdaq was smashed as well. What‘s key though, is that consumer discretionaries and bond market with the dollar are now waking up to correct appreciation of recession risks ahead, with all that means for retail sales, profit margins and corporate earnings.

Some market breadth indicators and equal weighted S&P 500 though offer glimmer of hope for some relief rally in the week ahead. Big picture, it‘s about the uncertainty if the economy is heading into recession already now, or whether the consequences of weak job market (rising unemployment) will be averted by aggressive rate cutting.

As I wrote in Friday‘s extensive analysis before VIX surpassed the 21-22 spike target (I‘m republishing also the long analytical post from our channel Friday so as to highlight it‘s about economic prospects being reevaluated rather than BoJ hike consequence for yen carry trade – if that unwind would be the major issue already now, we wouldn't have seen such a bid in long-dated Treasuries and 10y yield merely 3.79%). Bare minimum, now we have not 3 but 4 rate cuts this year (100bp altogether priced in, and 50bp Sep and Nov cuts becoming the mainstream expectation after this NFPs flop, and then there is Dec), with fears over asset valuations and future earnings reigning supreme.

With unemployment rate at 4.3% (beating expectations by 0.2%), this is roughly where it‘s usually starting to rise faster in the months ahead as temps and overtime go-tos have been depleted already. And this is after arguing for a cushion in bad NFPs not being that bad thanks to overstating the Beryl impact and not too high government hiring this month.

What‘s though been the key sectoral chart highlighting Friday‘s reaction to deteriorating job market – the feat being that retail sales get on the chopping block next? Consumer discretionaries.

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