A better-than-expected June jobs report created some concern that the Fed may not be as dovish as many market players have anticipated. The numbers were much stronger than forecast and that caused a sharp drop in equities, a rise in the dollar and pullbacks in bonds and gold. Basically a reversal in all the trends that have been in place since a much weaker-than-expected May jobs report.
As the day progressed the concern about a more dovish Fed eased but many market players remain in a "wait-and-see" mode at this point. While the chances of a half-point interest rate cut is now nil there are still very high odds of a quarter-point cut. There is no big change in the likelihood of what will happen at the Fed meeting at the end of July but if there are further economic positives the bulls hoping for a dovish Fed will be concerned.
It is an odd dynamic right now with the Fed being more important than the actual economy. If the economy weakens substantially from here there will be concerns that the Fed may not have sufficient ammunition but, currently, there is just enough economic softening to give the Fed sufficient power to do what the market thinks it should.
While volume was very light Friday, the intraday action was pretty typical of what happens around the holidays with traders engaging in some pockets of speculation. Some of the recent iPOs were particularly volatile.
Despite the "good economy" scare, the indices remain in an uptrend. Still, second-quarter earnings are coming up fast and that is going to set the tone from here.
Have a great weekend. I'll see you on Monday.