Market Call: What Should We Root For?

Both the bond and stock markets didn't do much on Friday following the release of December's employment report and NM-PMI. The former looked better-than-expected at first, but not as strong in the details (and downward revisions of the previous two months), and wage inflation was higher than expected. The NM-PMI was weaker than expected led by an unbelievable (literally) drop in its employment sub-index down to 43.3 (chart). The other NM-PMI components were much more solid (and believable): production (56.6) and new orders (52.5). Payroll employment in private services-providing industries actually rose $142,000 last month.

There was plenty for both hard- and soft-landers to support their outlooks in Friday's batch of economic indicators. The stock market rally may continue to stall while investors decide whether to root for weak economic indicators (so that the Fed will cut interest rates sooner rather than later), or for more signs of a resilient economy (implying a longer Fed pause) (chart).