Tomorrow’s jobs report is more important than usual. The Fed has implied that unless the data gets really bad they are not going to lower rates again (most feel they will have to anyway).
This means for the time being the markets can no longer play the "bad news is good news" story; that is, a poor jobs report would cause the market to rise because traders believe the Fed would be more likely to raise rates. Expecting 80,000 new jobs tomorrow; is 100,000 too much to ask?
Second big problem is increasingly narrow leadership. We have lost financials,retailers, builders. Now there are signs energy stocks are looking toppy; this leaves materials and techs.
Techs are really holding things up: just look at the stunning outperformance of the S&P 500 vs. the NASDAQ 100. Since the market bottom in August, the NASDAQ 100 has outperformed the S&P 23.0% to 11.0%.
Sounds good, but even here it is a narrow victory. This is a rally of the biggest of the big caps: the leaders are Microsoft(13% of the market cap of the NASDAQ 100), Google (8%), Apple (6%), together amounting to 27% of the market cap of the NASDAQ 100. That's a lot to put on these stocks.
Second group with a lot to carry are materials. The materials index hit an historic high yesterday. Metals, chemicals, gold stocks, all of which have benefitted from the global growth story and the weak U.S. dollar, have been big upside movers. Not today. Today, US Steel down 7.0%, Freeport McMoran down 4.8%, Alcoa down 3.6%, DuPont down 2.9%.
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