Macro — the market view

At 14:30 on Friday I was trading the Nasdaq live on TikTok when the US jobs report came out. I had a bull bias and expected a new ATH, the second in the same week. The report was “bad”: 29,000 new jobs when 90,000 were expected. The ATH came anyway. What changed was the expectations of the Fed. A week ago the market was pricing in two more hikes this year. After Friday, just one, and not even that one is certain. That was enough for an ATH.

1Why weak jobs became good news

It sounds backwards, but for the market the question is not how the economy feels but what the Fed does next. Fewer jobs mean less reason to hike, and every hike that gets priced out makes future profits worth more today. And the US does not need many new jobs to keep unemployment steady, because the workforce is barely growing any more. Weak, but not dangerous.

2The yield did not care

This is where it jars. The 10-year yield usually falls on weak jobs. It fell for an hour, then turned and closed at 5.3%, the highest since 2002. The people who lend money to the US government are looking at something other than jobs: inflation stuck above 3%, Brent crude above 100 dollars, and a government that borrows more every year. They want more pay. For anyone borrowing for a house, it feels like a hike, except nobody voted on it. The stock market celebrated the hike that was priced out. The yield did not care.

3Micron: great report, stock stood still

Micron, which makes the memory in AI servers, sold $54 billion in a single quarter, almost five times as much as the same quarter last year, and raised its forecast for the next. The stock barely moved. That is less strange than it sounds. After a rise of several hundred percent this year the report was already in the price, and what a report confirms does not move the stock. What moves it is the bar for the next quarter being raised, and that takes a few weeks. Nvidia is the clearest example: four reports in a row the stock has fallen on the day despite beating expectations every time, and yet it stands at an ATH today. The rise came between the reports, not on them.

Companies like that carry the Nasdaq. But on Friday more stocks in the S&P 500 fell than rose. A few giants lift, the rest feel the yield.

Oil fell during the week. Then there was fire near Riyadh.

Brent crude fell during the week, from 108 to just above 100 dollars, despite five tankers hit around Hormuz. The G7 is selling from its stocks and Saudi oil is getting out via the Red Sea. Then came Saturday: the Houthis say they hit Aramco's refinery south of Riyadh with missiles and drones, and smoke and fire rose over the facility. Saudi Arabia calls the claim misleading but has not explained the fire. Meanwhile Saudi Arabia is bombing the Houthis in Yemen and, according to Reuters, preparing a ground offensive within weeks to retake Bab el-Mandeb, the strait the Houthis seized in September. That war is about to grow, not fade. Pulling the other way is Trump, who says the war with Iran will soon be over and that oil prices will then come tumbling down. OPEC kept output unchanged today. None of this is priced. Oil opens tonight, and it is the first thing I will look at.

One more thing, which I think we will see more of: the FBI has found evidence that hackers took over the propulsion of a supertanker bound for Texas this summer. Oil has so far been about straits, pipelines and ports. Now it can be about code too.

The week ahead

• Tonight: oil opens. First trading after Riyadh.
• Monday 16:00 CET: ISM services. A hot number points to continued inflation pressure.
• Wednesday 20:00 CET: the Fed's minutes. Everyone voted for the hike, the question is how many want more.
• Wednesday 14 October: September CPI. Probably weighs heaviest for December.

The market got what it wanted. The yield did not care.

That can hold for a while, but not a whole autumn. My hypothesis: as long as the market counts on at most one more hike this year, stocks can handle this yield, because AI profits weigh more. If the market starts counting on two again, because Monday's ISM is hot or Wednesday's minutes show more Fed members wanting to hike, stocks have both the Fed and the lenders against them. And oil can take us there faster than the Fed: if Brent opens clearly higher tonight, inflation is back in the pricing before the minutes even arrive.