Stocks opened lower this morning, continuing to pout after a better than expected jobs report last Friday (see my blog entry titled “Good News is Bad News”). The Dow is currently down 139 pts and the SPX is down .6%. The worst performing sectors today are healthcare (-1%) and communications (-1%). The energy sector is up modestly as oil prices stabilized after OPEC agreed to continue modest production cuts. The market is in suspended animation pending Fed Chair Jerome Powell’s annual congressional testimony on Wednesday & Thursday. Traders will be scrutinizing every word for clues about potential interest rate cuts. Friday’s jobs report sent gold down (-1% so far this month), but most other commodities are a bit higher today. WTI crude oil is back up around $57.90/barrel. It is thought that Saudi Arabia is trying to defend oil at $50/barrel or above. The bond market is mixed today. Long-term US Treasuries edged higher but corporates are down in price. The 10-year Treasury Note yield is hovering around 2.03%, and Barron’s used this stat to assert, “There is little value in the bond market.”

As I pointed out Friday, traders seem to be demanding a Fed rate cut in order to push stock averages higher. And it is true that lower interest rates tend to boost stock market valuations. But unfortunately, the Fed will only cut rates if it is sufficiently convinced that the economy is under serious threat. Art Hogan, Chief Market Strategist at National Securities says, “We’re kind of in middle ground here with a real contemplation of would you rather have a rate cut or an improving economy.” Friday’s jobs report made a rate cut (at least in the near-term) unnecessary, but stock traders aren’t convinced. On one point most everyone agrees: earnings season is nearly upon us and will certainly yield some clarity on the trajectory of growth.

A report published by Morgan Stanley today asserts that there is even more uncertainty overseas. Global PMIs—indexes measuring business activity—are weakening and trade worries are worsening. Of course, as noted above, slower growth will likely encourage central banks to loosen monetary policy. But “the positives of easier policy will be offset by the negatives of weaker growth.” The firm’s analysts say investors haven’t yet learned that weaker economic growth affects stock market return more negatively than rate cuts will help.

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