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Inside Markets — Labor Data

Deteriorating Internals

June 18, 2024

Weekly jobless claims are the highest frequency labor data we have. Last week’s upside jobless claims print of 242,000 took people by surprise and elevated the status of the report. Consensus is looking for weekly jobless claims to decline to +236,000 this week (Wed-Wed).  A number between +230,000 and +250,000 likely results in increased rate cut expectations, easier financial conditions and equity upside. Jobless claims below +220,000 will likely result in higher bond yields and lower stock prices, while something north of +260,000 will generate increased growth/recession concerns, lower yields and possibly lower stock prices.

Deteriorating market internals (see yesterday’s note) make equities more vulnerable to bearish developments in our view. New highs on narrow leadership can only continue for short periods of time – eventually leadership needs to broaden out or a bearish trend will develop. Near-term SPX support sits at the 6/4 upside gap of 5291 and failure to maintain that level would be the first sign of technical trouble for the index.  Participation from the small cap Russell 2000 (RTY) is still the key to a more lasting equity bull market.   At the moment, the RTY is closer to breaking down than it is to signaling healthy broader market participation.  The RTY currently sits at 2030 and needs to maintain levels north of 2010 to keep bullish technical hopes alive.

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