This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Global Macro: Back to Fundamentals

NEW YORK ( TheStreet) -- The U.S. nonfarm payrolls data released Friday showed investors that the economy is on its way toward sustainability.

The jobs report also brought a change in how markets react to news involving monetary policy. A strong employment reading led many to believe that tapering was most likely to be announced at September's Federal Reserve meeting.

That sent yields spiraling higher and equities followed suit. That was contradictory to previous weeks when the markets were still under the curtain of Fed stimulus, which led to equity selloffs on good news on fear the Fed would cut its lifeline sooner than investors hoped.

For weeks now, markets have expected that central bank stimulus is finite. That has led traders to focus more on fundamentals than on artificial inflation created by the Fed. Positive news for the labor market indicates a stronger economy, which is bullish for risk assets.

The first chart below is of iShares Barclays 1-3 Year Treasury Bond (SHY) over iShares Barclays 20+ Year Treasury Bond (TLT). This pair represents the Treasury yield curve. When the pair rises, it represents long-term yields rising faster than short-term yields, thus a steepening of the curve.

The pair shows a steady uptrend starting in mid-May, around the time Fed Chairman Ben Bernanke hinted at an end to quantitative easing.

On Friday, the pair spiked considerably higher as employment data all but confirmed to investors that the Fed will begin to slow down its bond purchases in September. As predictions become more concrete, the curve will continue to steepen toward multiyear highs.

The next chart is of Guggenheim S&P 500 Equal Weight (RSP) over SPDR S&P 500 (SPY). This pair represents market breadth.

As the pair moves higher, it indicates that a majority of the stocks in the index are participating in the move as well. Moves higher are bullish for risk assets. The pair recently broke upward as economic data confirmed an improving environment.

The final charts show the U.S. unemployment rate on top and civilian labor force participation rate on bottom. The charts begin in January 2000 and continue to the present.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,172.68 -107.06 -0.62%
S&P 500 1,994.29 -16.11 -0.80%
NASDAQ 4,527.6890 -52.10 -1.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs