A Fourth of July Surprise?

Fred Imbert and Thomas Franck of CNBC report stocks rise after better-than-expected jobs report to close out winning week:
Stocks rose on Thursday following a better-than-expected U.S. jobs report as the economy tries to recover from the coronavirus pandemic.

The Dow Jones Industrial Average closed 92.39 points higher, or 0.4%, at 25,827.36. The Nasdaq Composite hit a record high, climbing 0.5% to 10,207.63. The S&P 500 also gained 0.5% to end the day at 3,130.01. Boeing contributed to the gains, rising 0.6% after the airplane maker completed recertification flights for its grounded 737 Max jet.

Thursday’s gains led to strong weekly performances for the major averages. The Dow rose 3.3% this week and the S&P 500 climbed 4% in the same time period. It was the Dow and S&P 500′s biggest weekly gains since June 5. The Nasdaq posited its best weekly performance since May 8, jumping 4.6% this week. U.S. markets will be closed on Friday for the July Fourth holiday.

Record jobs gain

Wall Street started the session with sharp gains after the government reported that a record 4.8 million jobs were created in June. Economists were expecting 2.9 million jobs were created. The unemployment rate fell to 11.1% from 13.3% in May. Economists were expecting a rate of 12.4%, according to Dow Jones.

“Another major surprise here in terms of market expectations,” said Christian Scherrmann, U.S. economist at DWS. “What we’ve seen in May and June is a blueprint for a fast recovery, but only once the virus situation is under control.”

Last month, economists forecast a loss of 8 million jobs in May and the economy gained 2.5 million payrolls instead.

The Labor Department also said, however, that initial jobless claims rose by 1.427 million in the week ending June 27. Economists polled by Dow Jones expected initial U.S. jobless claims to rise by another 1.38 million, down from 1.48 million the week earlier. The data also showed the number of continuing claims — the number of people receiving unemployment benefits for consecutive weeks — rose to 19.29 million, an increase of about 59,000.

“There’s a disconnect there, when you look at the the two numbers,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors, referring to the jobs report and the unemployment claims data. “It does show you there is some distortion in the data ... I don’t think the true underlying picture of the labor market will be clear for several months.”

Virus cases keep spiking

The major averages cut their gains after Florida reported a one-day spike of more than 10,000 coronavirus cases. The U.S. also reported a record of more than 50,000 cases in one day on Wednesday.

Stocks that would benefit from an economic reopening rolled over. United Airlines and American closed slightly lower after jumping earlier in the day. Cruise operators Carnival, Norwegian Cruise Line and Royal Caribbean were down at least 2.6% each.

“Any piece of news can send us moving pretty quickly one way or the other,” said JJ Kinahan, chief market strategist at TD Ameritrade. “You saw that with the Florida news.”

“You have to have a note of caution; it’s not an all-clear day,” he said.

The moves Thursday followed the market’s first trading day in the third quarter.  Both the S&P 500 and Nasdaq Composite gained during the regular session on Wednesday, with the latter jumping more than 1% to an all-time high.
Alright, it's a short week as we head into the long Fourth of July weekend.

Before I get to this morning's jobs report, I embedded a few tweets on the ongoing health crisis in the US:

I tell you, this "mask mutiny" going on down south is just crazy. Even crazier is young people playing games to see who can catch COVID:

None of this should surprise us. There is a huge subset of the population which is reckless and ignorant. If they only understood the truth behind this virus and how so many innocent people have succumbed to it:

No wonder most workers don't want to return to the office:

This is why I agree with those who think refusing to wear a mask isn't patriotic, it's just selfish:
As Dr. Deborah Birx, the White House coordinator for the coronavirus task force, told a Fox News audience no less, not wearing face masks where there's close proximity to strangers is "devastatingly worrisome to me personally because if they go home and infect their grandmother or their grandfather who has a co-morbid condition and they have a serious or unfortunate outcome, they will feel guilty for the rest of their lives."

And let's be clear, wearing a mask doesn't just save lives, it will benefit the economy, so I don't understand all these yahoos who think it's "communist" and not patriotic:

What can be more patriotic than taking care of each other to ensure more economic activity?

Alright, that brings me to this morning's jobs stunner which made President Trump's day:

But this jobs report made no sense, especially given how many states are delaying reopening or shutting down again as coronavirus resurgence takes hold.

Also, when you look at the rise of weekly intitial claims, something definitely doesn't add up:

It's almost as if the BLS is only releasing "Trump friendly jobs reports" but the weekly claims paint a dire picture.

If you ask me, the BLS has a whole lot of explaining to do, and we will only get the true picture over the next three months.

But it was enough to propel stocks higher, capping a solid week where once again, a handful of tech shares led the entire market higher:

Great! Onward and upward! As long as the Nasdaq keeps making record highs, the Fed is happy and so are elite quant hedge funds (Citadel, Renaissance, Point72, etc.) front-running the Fed.

And it's not just elite hedge funds, now we have CTAs buying tech shares as they break out to record highs with one simple algorith: "as long as they remain above their 10-week moving average, we are buying every dip":

But when the next dip comes, it will be brutal and a lot of investors chasing stocks higher in this momentum market will get burned which is why smart pension fund managers are selling stocks here:

The counter-argument is you never fight the Fed, all those portfolio managers gripped by FOMO and TINA will keep plowing money into stocks, especially tech stocks, and off we go to another record bull market similar to 2009-2019.

Look, stocks could melt up from here but that will only make the next crisis impossible to manage.

The Fed is caught trying to manage expectations but if it creates moral hazard and another tech bubble, it will only ensure a bigger crisis down the road. Even Ray Dalio sees the train wreck ahead:

Let me be blunt: these are classic liquidity-driven momentum markets, they never end well and when the correction comes, it will be a violent one.

It typically catches investors asleep at the wheel and that's exactly where we are now as the Fed has managed to collapse volatility and complacency is setting in once more:

It's also worth noting that Financials have severely underperformed the market over the last five trading days:

Kind of makes you wonder if there's an ominous development which is going to strike banks:

Don't worry, I'm sure the Fed is on it. /sarc

Anyway, here are today's large cap winners/ losers as well as the large-cap winners and losers over the last three months:
Alright, stay safe and remember my rules for surviving COVID-19:
  • Stay the hell away from people, only trust a handful of people and even they are a risk.
  • Wear a mask in public. If people think you're weird, let them, it shows you respect your health and theirs too.
  • Respect social distancing even if you're wearing a mask
  • Wash your hands often, sanitize them when entering and leaving a store
  • Take care of your body, eat properly, exercise moderately and sleep a full eight hours minimum
  • Take a minimum of 1,000 IUs of vitamin D a day and maybe more (I prefer 3,000 to 5,000 IUs a day). This is the only supplement you really need and sunlight isn't enough.
On that note, I wish all Americans a Happy Fourth of July! Enjoy the long weekend, I'll be back next week.

Below, Scott Gottlieb, former FDA commissioner, joins "Closing Bell" to discuss what should be done as coronavirus cases continue to surge in the US.

Also, Victoria Fernandez, Crossmark, on why record jobs gain isn't telling the whole economic story. With CNBC's Dominic Chu and the Fast Money traders, Brian Kelly, Tim Seymour, Steve Grasso and Karen Finerman.

Third, CNBC's "Halftime Report" team breaks down their investment strategies and what they say investors should pay attention to in the market.

Fourth, CalSTRS chief investment officer Chris Ailman discusses the disconnect between the financial markets and the economy, and how one of the nation's largest public pension funds recommends investors set themselves up for the second half of the year.

Lastly, recent central bank actions mean capital markets are no longer "free," according to Ray Dalio, the billionaire founder of Bridgewater Associates. "Today the economy and the markets are driven by the central banks and the coordination with the central government," Dalio said in a conversation with Bloomberg’s Erik Schatzker during the Bloomberg Global Asset Owners Forum.