Fed Faces Tougher Call After Jobs Data

The December jobs report just made the Federal Reserve's life more complicated. Here's the thing: this report is called the mother of all reports for good reason. It carries weight. And what it's telling us right now is a story that doesn't make the Fed's decision any easier.

Let's break down what we got. Non-farm payrolls came in at 256,000 versus expectations of 155,000. Non-farm private payrolls hit 223,000 against a consensus of 150,000. The unemployment rate dropped to 4.1% when economists were expecting 4.2%. Average work week held steady at 34.3 hours, matching expectations. Average hourly earnings grew 0.3%, right in line with forecasts.

Here's what matters most: the unemployment rate. That number came in below consensus, which sounds great for workers but creates a problem for anyone hoping the Fed would cut rates in January. The market has been pricing in a cut. The data isn't cooperating with that narrative.

Meanwhile, the SPDR S&P 500 ETF Trust (SPY), which tracks the benchmark S&P 500 index, is consolidating just below a key technical level. The interesting part? Even with the market levitating at these heights, the RSI isn't showing overbought conditions. That actually increases the probability of the market breaking through resistance and moving higher.

Meta's Massive Nuclear Bet

While everyone's focused on artificial intelligence consuming enormous amounts of power, Meta Platforms Inc (META) is doing something about it. The company just announced three significant nuclear power deals that show just how serious big tech is getting about securing long-term energy supplies.

First, Meta signed 20-year agreements to purchase power from three nuclear plants: Perry, Davis-Besse, and Beaver Valley. These facilities, all owned by Vistra Corp (VST) and previously operated by FirstEnergy Corp (FE), will provide Meta with more than 2600 megawatts of power. That's not a small commitment.

Second, Meta is backing Oklo Inc (OKLO) to develop 1.2 gigawatts of power capacity in Ohio. Meta isn't just signing a purchase agreement here. They're prepaying for power and providing funding to move the project forward. That's putting real money where the press release is.

Third, Meta will fund two reactors from TerraPower. Add it all up, and you're looking at a tech company making one of the largest commitments to nuclear energy we've seen from the private sector.

Trump's $200 Billion Housing Market Intervention

President Trump is instructing Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corp (FMCC), better known as Fannie Mae and Freddie Mac, to purchase $200 billion worth of mortgage bonds. The goal is straightforward: spur home buying by making mortgages cheaper.

The expected impact? This move should reduce 30-year mortgage rates by approximately 0.25%. That's not huge, but it's meaningful for buyers on the margin. The trade-off is that it will likely push up yields on long-term Treasury bonds slightly.

Who benefits? Home builders are the obvious winners. The iShares US Home Construction ETF (ITB) and individual builders like KB Home (KBH), D.R. Horton Inc (DHI), and Lennar Corp Class A (LEN) should see positive momentum. Mortgage companies like Rocket Companies Inc (RKT) also stand to gain from increased activity.

In other Trump administration news, the president announced that oil majors will spend $100 billion to support U.S. goals in Venezuela. Details remain sparse on what exactly that means.

Supreme Court Tariff Decision Looms

The Supreme Court may rule on tariffs today, and the consensus expectation is that the Court will find a way to support President Trump's position. But here's the wrinkle: companies are already lining up to seek refunds on tariffs they've paid, just in case the Court rules against the tariff authority.

This decision could move markets, particularly if the ruling goes against expectations. It's worth watching closely.

Housing Data Shows Builder Optimism

Housing starts came in weaker than expected, but the building permits data tells a more optimistic story. Here's what we're seeing:

September housing starts reached 1.306 million versus expectations of 1.320 million. September building permits came in at 1.415 million, well above the 1.340 million consensus. October housing starts dropped to 1.246 million against expectations of 1.340 million. But October building permits stayed strong at 1.412 million versus the 1.355 million consensus.

Building permits lead housing starts, so the stronger permits numbers suggest builders remain optimistic about future demand despite the current slowdown in actual construction starts.

China Pressures Japan on Rare Earths

China is escalating pressure on Japan over its support for Taiwan. In the latest move, China is restricting exports of rare earth elements to Japan. The timing is notable: China appears emboldened by recent U.S. actions in Venezuela and seems to be testing how far it can push its regional neighbors.

Magnificent Seven Money Flows

Most portfolios have become heavily concentrated in the Magnificent Seven technology stocks, which makes monitoring their daily money flows increasingly important for understanding broader market direction.

In early trading, money flows are positive in Apple Inc (AAPL), Nvidia (NVDA), Alphabet Inc Class C (GOOG), and Tesla Inc (TSLA).

Money flows are neutral in Amazon.com, Inc. (AMZN) and Meta (META).

Money flows are negative in Microsoft Corp (MSFT).

For the broader market, early money flows are positive in both S&P 500 ETF (SPY) and Invesco QQQ Trust Series 1 (QQQ).

Commodities and Crypto

For investors tracking commodities, the most popular ETFs remain SPDR Gold Trust for gold exposure, iShares Silver Trust for silver, and United States Oil ETF (USO) for oil.

Bitcoin (BTC) is seeing selling pressure in early trading.

Investment Strategy Considerations

In this environment, consider maintaining quality long-term positions while keeping appropriate protection through cash, Treasury bills, or tactical hedges based on your individual risk profile and time horizon.

The protection band concept remains relevant: higher cash and hedge levels suit conservative or older investors, while lower protection bands work for aggressive or younger investors with longer time horizons. A 0% protection band would indicate full investment, while 100% would suggest maximum defensive positioning.

Here's a reminder that matters: you can't take advantage of new opportunities if you're not holding enough cash. When markets shift, liquidity gives you options.

For those managing individual stock positions, consider using partial stop quantities for non-ETF holdings, implementing wider stops on remaining positions, and allowing extra room for high-beta stocks that typically move more than the overall market.

The Traditional Portfolio Question

For investors following the traditional 60/40 stocks-to-bonds allocation, the current environment requires some thought. Probability-based risk-reward calculations adjusted for inflation don't particularly favor long-duration strategic bond allocations right now.

If you're committed to maintaining bond exposure, focus on high-quality issues with durations of five years or less. More sophisticated investors might consider treating bond ETFs as tactical positions rather than strategic allocations in the current rate environment.