T3’s Take 3: Gold Screams on NFP Miss

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By Michael Comeau

1) NFP Miss

Today we got the big bad August nonfarm payrolls report, and unfortunately, it disappointed.

The 151K headline number missed expectations by 29K, and unemployment came in below consensus.

And perhaps most importantly, average hourly earnings rose just 0.1% month-over-month, missing the 0.2% consensus.

The Fed doesn't make decisions based on a single data point, but watch the trend: US economic data has been on a downtrend as of late, as you can see in this chart of the Citi US Economic Surprise Index:

2) Gold Rocks – But Has Anything Changed?

Gold had been selling off since mid-August on an endless stream of hawkish comments from Fed officials.

However, with today's NFP miss, traders decided to once again buy what now looks like an oversold dip.

Gold rose 0.9% to $1329/oz and the gold miners ETF (GDX) rallied an impressive 3.6%, putting it up 7.3% in 2 days.

However, the rally in gold does not imply that traders believe the Fed will go on hold.

The US dollar was remarkably strong today after an early dip, and US Treasury yields rose.

The dollar and yields tend to go up when traders believe the Fed will raise rates.

3) Bulls Fight Back

In recent days, tension clearly appeared on the tape, but today's NFP miss wasn't bad enough to derail the bull.

The S&P 500 rose 0.4% to 2179.98, while the Russell 2000 rose an impressive 1.0%.

And much to my chagrin, the VIX fell 11.4% to 11.95.

Regional banks were strong again, and we also saw a nice intraday rally in large-cap tech names, with Apple (AAPL) pushing up 0.9% to $107.76.

On the downside, biotech (IBB) fell on Presidential Candidate Hillary Clinton's drug pricing plan, which is aimed at curbing “unjustified” drug price hikes.

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