Jobs Report Delivers Mixed Signals

The November employment report landed with all the clarity of a Magic 8-Ball, delivering contradictory signals that left traders scratching their heads. On one hand, job creation came in strong. On the other, wage growth basically flatlined in a way that should concern anyone who buys groceries.

Here's what the data actually showed. Non-farm payrolls added 64K jobs versus the 30K consensus estimate, nearly doubling expectations. Private payrolls followed suit at 69K versus 34K expected. So far, so good. But then things get interesting.

The unemployment rate jumped to 4.6%, well above the 4.4% consensus. That matters because the Federal Reserve has its laser pointer focused on unemployment right now. Average hourly earnings grew just 0.1% versus expectations of 0.3%. Let that sink in for a moment. Many workers are looking at annual raises hovering around 1% while inflation does its thing.

The average work week held steady at 34.3 hours, matching expectations exactly.

So what does this all mean? You've got decent job growth, which sounds positive. But wages are barely budging, and more people are unemployed. It's the kind of report that makes everyone's interpretation correct depending on which data point they emphasize.

Tech Stocks Flirt With Oversold Territory

Looking at Invesco QQQ Trust Series 1 (QQQ), tech stocks are currently sitting just under the top band of zone 1 support. The Relative Strength Index shows tech has entered oversold territory, and oversold markets typically bounce. That's particularly relevant with positive seasonality approaching.

The momentum traders did their predictable thing, immediately buying stocks when the economic data dropped. But as of this writing, that rally had already fizzled. Tech stocks remain under pressure despite technical indicators suggesting a potential rebound.

Retail Sales Hold Up Where It Counts

Since the U.S. economy runs about 70% on consumer spending, retail sales data deserves close attention. The October numbers tell an interesting story. Headline retail sales came in flat at 0.0% versus 0.3% expected, which initially looks disappointing. But strip out autos, and retail sales ex-auto climbed 0.4%, beating the 0.3% consensus.

Translation: Americans kept spending on most things. They just weren't buying cars. Given current interest rates and vehicle prices, that's hardly shocking.

What This Means for the Fed

Combining all this data, the probability of a Federal Reserve rate cut in January appears to be around 20%. That's not zero, but it's not exactly high either. Of course, we've got inflation data coming up that could completely reshape this picture, so consider that estimate written in pencil.

The Fed finds itself in a tricky spot. Rising unemployment argues for cuts. Persistent inflation argues for holding steady. Wage growth that's barely moving argues for... well, it's complicated.

Defense and Oil Stocks Slide on Ukraine Developments

In geopolitical news, the U.S. has offered Ukraine a security guarantee, a development that could potentially accelerate the end of the conflict. Defense stocks and oil saw selling in early trading as markets digested the implications. If peace prospects improve, demand for weapons systems and the geopolitical risk premium built into oil prices both diminish.

Visa Makes Crypto Move

In a development that crypto enthusiasts will want to note, Visa Inc (V) announced it will use USDC stablecoin for a pilot settlement program. USDC is issued by Circle Internet Group Inc (CRCL). This represents significant validation of stablecoins by traditional financial infrastructure. When a payments giant like Visa experiments with crypto rails, it's worth paying attention.

Magnificent Seven Money Flows

Most portfolios have become heavily concentrated in the Magnificent Seven tech stocks, making daily money flow monitoring increasingly important. Here's how things looked in early trading:

Positive money flows appeared in NVIDIA Corp (NVDA), the chip maker that's become synonymous with AI infrastructure.

Amazon.com, Inc. (AMZN) showed neutral money flows, sitting on the fence.

The rest of the cohort faced negative money flows: Apple Inc (AAPL), Microsoft Corp (MSFT), Alphabet Inc Class C (GOOG), Meta Platforms Inc (META), and Tesla Inc (TSLA) all saw money moving out in early trading.

Both SPDR S&P 500 ETF Trust (SPY) and QQQ registered negative money flows, reflecting broader market caution.

Bitcoin Treads Water

Bitcoin (BTC) remains range bound with a downward bias, lacking the momentum that characterized its recent surge toward six-figure territory. The crypto market appears to be waiting for its next catalyst.

Portfolio Positioning Considerations

For investors wondering what to do with all these crosscurrents, the approach depends heavily on individual circumstances and risk tolerance. Maintaining quality long-term positions makes sense, but so does building appropriate protection through cash positions, Treasury bills, or hedging strategies.

Your protection band should reflect your situation. Older or more conservative investors might want higher cash or hedge allocations. Younger or more aggressive investors can operate with less protection. The key insight: you can't take advantage of new opportunities if you're fully invested with no dry powder.

For positions you're holding, consider using partial stop quantities for individual stocks while allowing wider stops on remaining positions. High beta stocks that move more than the broader market need extra room to breathe.

The Bond Allocation Question

For those following the traditional 60/40 portfolio allocation between stocks and bonds, the current environment presents challenges. Probability-based risk reward adjusted for inflation doesn't particularly favor long-duration strategic bond allocation right now.

If you're committed to maintaining a 40% bond allocation, focus on high-quality bonds with durations of five years or less. More sophisticated investors might consider using bond ETFs tactically rather than strategically, treating them as shorter-term positions rather than buy-and-hold core holdings.

The current market environment rewards flexibility and cash reserves. With tech stocks oversold but still under pressure, retail sales holding up despite weak wage growth, and geopolitical developments shifting defense and energy dynamics, we're in one of those periods where patience and optionality matter more than aggressive positioning in any single direction.