Will Jobs Cement a Pause
Macro Perspectives
For the second consecutive day, we had a voting Fed member publicly making the case to "skip" any rate action in the June meeting (which is two weeks away).
Clearly, they don't want to use the word "pause," as the algorithms are probably locked and loaded to buy stocks if that word hits the newswires from a Fed speaker.
That said they had more supportive data for a pause in the morning, in the ISM report. Remember, the Fed was concerned earlier in the year that inflation might be bouncing back. It however should be very clear now (not just domestically but globally) that the path is lower. You can see in the chart below, the steep drop in the "prices paid" component in the manufacturing data from May.
With this language of the past two days, the market has quickly swung from a bet for another quarter point hike, to bet on a pause (about 80% chance).
We will get the jobs number today - the expectation is for a sub 200k payroll number, which would be the second weakest in the post-lockdown era. Anything in-line or weaker would cement a pause, and should provide fuel for the remainder of the stock market, which hasn't enjoyed the same performance success as the big-tech regime (thus far, ytd).
