September nonfarm payroll much higher than expected. Is this good news?

September US nonfarm payroll figures were better than expected coming in at 254k vs expectations of 150k. Both July and August were also revised up. Hourly wage is increasing slightly higher than expected at 0.4% and 4% annualised (vs 0.3% and 3.8% expected). This news will been taken as a comfort as the markets are still struggling to work out the underlying direction following September's interest rate cut. The escalation in the Middle East and the possible bombing by Israel of Iranian oil assets had increased fears of a US recession, but certainly in the very short term, the market is likely to see the US economy being stronger than feared, so better able to weather external oil shocks. If Israel / Iran come back from the brink then the US focus will then be on the next interest rate cut, on the face of it, the September nonfarm's would not appear to support a more aggressive stance in interest rate cuts.

In yesterday's US markets the Indices were all down. Economic concerns from a rising oil price post Biden's comments re a possible Israel attack on Iran oil infrastructure and Friday's nonfarm release both took their toll. Mag7 outperformed the wider market. The VIX was up again at 20 - it hit 65 intraday on 5 August, its highest level since Covid in 2020. The main indices were; DJIA -0.44%, S&P 500 -0.17% and Nasdaq -0.04% (Mag7 -0.06%). On an equal weighted basis (our measure) the overall market was up -0.59%. Breadth was soft at 32% (range of 12% to 88% over the last six weeks) volumes were also soft at 7.9b (the average daily volume over the last year of 7.8b and hit 15bn on Friday 8/20). 

One day returns as follows - equal weight basis: Mag7 -0.06% (NDVA +3.4%, META +1.7%, TSLA -3.4%, AMZN -1.5% ), large cap -0.5%, medium cap -0.58%, small cap -0.79% and micro cap -0.59%. On a 1 and 2 week equal weight basis respectively; Market -0.5% and -0.8%, Mag7 -1.5% and -0.2%, Large caps -0.4% and +0.8%, Medium cap flat and +1.6%, Small cap -1.1% and -2% and finally Micro cap -0.2% and -1.1%.