Can stocks handle job growth and wage growth?

Traders work on the floor of the New York Stock Exchange, Dec. 24, 2014.
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Let's run through the jobs report: 257,000 jobs created in January, above expectations of 237,000; upward revisions in November (423,000!) and December; wage growth up 0.5 percent; year-over-year growth of 2.2 percent.

Job growth and wage growth? We haven't seen this in a long time.

The S&P 500 and bond yields are up, while gold is down.

Even before today's open, we have been in the midst of a powerful rally, largely of a cyclical nature.

Cyclicals this week

  • Energy: up 5.7%
  • Materials: up 5.0%
  • Consumer discretionary: up 4.4%
  • Financials: up 4.0%
  • Industrials: up 3.2%

Both the S&P 500 and Russell 2000 are now up on the year. The S&P Midcap Index is at an historic high.

Will we see more rate-related selling? There's already some pressure on Treasurys. The iShares 20+ Treasury Bond ETF, after hitting new highs earlier in the week, is now down four days in a row.

Bulls have been arguing that equities should do well in general, as long as the economy is growing. Bears, obviously, have pointed out that equities have had problems in recent years when rates begin to rise, even a little.