Stocks broke to fresh all-time highs yesterday as the bears were once again unable to get anything going with the overbought condition and concerns over politics in Washington. The onus is now on the bulls to make the move stick and to avoid the dreaded "breakout fake out."

Until just a few minutes ago, it looked like the bulls were going to continue to run on this fine Friday morning. But then the Big Kahuna of economic data - the Jobs Report - for May was released. In short, the report ran counter to the upbeat data on private sector payrolls from ADP and came in on the disappointing side.

The Labor Department reported that the U.S. economy created 138,000 new jobs during the month of May, which was well below the expectations for 184,000. In addition, the last two months' new jobs totals were revised lower. April's job creation was cut by 37,000 to 174K while March's already weak numbers were reduced further to 50K from 79K. This means that the economy created 66K fewer jobs over the last three months than originally reported.

The good news in the report was that the nation's Unemployment Rate fell to 4.3% last month. This was a tenth lower than the expectations for an unchanged reading and the lowest level of unemployment since late 2001. However, analysts note that the decline in the unemployment rate can be attributed more to people leaving the labor force than an increase in the number of people finding new jobs.

On that score, we note that the Labor Force Participation Rate fell 0.2% in May to 62.7%, which is one of the lowest levels seen since the late 1970's.

One analyst noted that the decline in the unemployment rate occurred due to the developing tightness in the labor market, which makes it harder for companies to fill positions.

Next, Average Hourly Earnings rose by 0.2% last month, which was unchanged from April and below expectations. On a year-over-year basis, wages have increased 2.5%.

In response, stock market futures have given up the majority of their early gains and the yield on the 10-year is currently trading at the lows for the year.

So, from a stock market perspective, it would appear that it is once again "game on" regarding the status of the all-important "breakout" to the upside. In short, if the bulls can hold the line at S&P 2418 they will maintain the upper hand going into next week. However, a dip below this line in the sand will suggest a return to the sideways trading range. Stay tuned.

Thought For The Day:

Try smiling early and often today...

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

      1. The State of Trump Administration Policies
      2. The State of the U.S. Economy
      3. The State of Earning Season

Wishing you green screens and all the best for a great day,

David D. Moenning
Chief Investment Officer
Sowell Management Services

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

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