Strong September nonfarm payroll pushes the market higher, led by Mag7 and micro cap stocks

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 short term, the market is likely to see the US economy being stronger than feared so better able to weather external oil shocks. The nonfarm figures are less supportive of a bigger cut in interest rates.

The US Indices were all up on Friday following the strong September nonfarm payroll number. Mag7 outperformed the wider market. The VIX was down slightly to 19 - it hit 65 intraday on 5 August, its highest level since Covid in 2020. The main indices were; DJIA +0.81%, S&P 500 +0.90% and Nasdaq +1.22% (Mag7 +1.64%). On an equal weighted basis (our measure) the overall market was up +1.37%. Breadth was a healthy 69% (range of 12% to 88% over the last six weeks) volumes were flat 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 +1.64% (TSLA +3.9%, AMZN +2.5%, META +2.3, NVDA +1.7 ), large cap +0.97%, medium cap +1.16%, small cap +1.46% and micro cap +1.49%.

On a 1 and 2 week equal weight basis respectively; Market +0.1% and +1.4%, Mag7 +0.3% and +1.9%, Large caps +0.2% and +2.3%, Medium cap +0.5% and +3%, Small cap -0.4% and +0.6% and finally Micro cap +0.3% and +1.2%. 

The sector bias favoured the Bull market sectors on Friday. The recent strong performance in Chinese stocks continues to distort the market with some continued profit taking making Academic & Educational the worst performer again yesterday. Conversely Consumer non-Cyclicals was the best performing sector due to Chinese stocks. Consumer Cyclicals were +2% on the day, Chinese Auto stocks helped push the sector higher but Department Stores and Apparel & Accessories both pulled up the sector performance. Fintech including Blockchain performed well again on Friday pushing the Tech sector higher. Aerospace & Defence was the best performer in Industrials and Biotech the best in Healthcare.

A notable number of 52 week highs in the following sectors: Consumer Cyclicals (across the sector), Energy (fossil fuels), Financials (across the sector), Industrials (Construction and Business Support and Aerospace and Defence presumably on the back of escalation in the Middle East), Real Estate (a number of Chinese companies), Technology (Software & IT Services including a number of Chinese online services companies again) and Utilities (Electric & IPPs again).

Notable high volumes in Consumer Cyclicals (across the sector again) and Technology (Software & IT Services again)