Cleary two things are happening. The ,market is digesting the recent post FED move. And... the market is setting up for its next big move.
That huge jobs report on Friday did not help the upside narrative. Interest rate expectations are now higher than they were previously with the market now seeing NO rate cut in 2023. Previously odds favored 1-2 .25% cuts.
Cheap money = higher equity markets. We aren't going to see that cheap money come back any time soon. Yet the market remains strong.. all things considered. Earnings reports have been bought. Look no further than the recent MSFT and AAPL reports.
The market is looking out from here and seeing weakness?
We can talk all day about inflation. But what really matters is jobs. If jobs are in short supply, wage pricing power for potential employees... is much lower than when employers are having a tough time filling positions.
For inflation to roll over in a meaningful way, we need wages to at least stop their ascent. Until that happens inflation will remain sticky.
The headline 500K NFP on Friday implies just that. However if the market is looking out and see the job market weakening in a meaningful way down the road. Wages just may have topped as well. And that would be bullish for the market.
The SPY is heading to $430 in the short term. From there we re-evaluate.