Healthy Economy, Strong Earnings Will Drive Stock Market North
$DIA, $SPY, $QQQ
Soon the stock market will reflect the economy, and all systems are on Go.
- March Private Sector Jobs, Non-Manufacturing Activity and Help Wanted OnLine
- ADP: 241,000; Goods: 65,000/ ISM (Non-Man.): -0.7 point; Orders: -5.3 points/ HWOL: up 102,100
The Institute for Supply Management’s March reading on the non-manufacturing sector looks like its report on manufacturing: Conditions have moved from robust to very strong.
The level of demand is strong enough that backlogs are growing and hiring is accelerating.
ADP says US job demand is strong and the Supply Managers indicating that hiring is increasing, it should not have been a surprise to see that the Conference Board’s measure of online want ads surged in March.
Every sector, except restaurants, increased their advertising activity. Only in New England did the number of want ads drop.
There are a significant number of occupations where the volume of ads exceeded the number of unemployed in that profession looking for jobs.
Healthcare and computer sciences are almost devoid of supply and in those as well as a variety of other areas, wage pressures have to be significant.
On 13 April we entering earnings season in earnest, and Q-1 reports should be good, if the economy is any factor in creating profits.
And for the 1st time in history, no S&P 500 company cut its dividend. Dividends also hit record highs. And stock buybacks are soaring as well, so when you look at the economic and stock fundamentals.
For the FOMC members, the fundamentals are clear: the economy is strong.
So, they will be focusing on the inflation signals.
No matter what the headline job number looks like, the data point you want to look for Friday is wage growth. If that is high start pricing in another rate hike in June. With economic growth so good, the Fed knows it can raise rates without doing damage and that is what the FOMC will do.
And with a healthy economy, strong earnings will drive stock market North after it has consolidated the massive gains since President Trump’s election.
The Bulls are in charge.