Midday Update: Rise in Unemployment Rate and Oil Whacks Market

What a difference a day makes, right? Yesterday, there were breakouts all over the place. Retail was strong, tech and financials were rising along with oil, and sentiment was growing bullish. Today, the polar opposite.

The unemployment rate jumped to 5.5% this morning, which took the market by surprise. The payrolls report showed a loss of -49k jobs (vs. -60k consensus). Looking deeper at the numbers, the jump in unemployment was actually a result of a larger number of people entering the workforce (espcially high school and college students), and does not really correlate to increased layoffs.

But the spike in oil really weighed on investor sentiment. Oil is surging another +5% today, on top of yesterday's big rise. The main culprits are a weak dollar today, comments from Israel that an attack on Iran may be unavoidable, and Morgan Stanley's view that crude prices could hit $150 by July 4th.

On the bearish side of the argument, demand destruction is really starting to show up. Several airlines have taken out capacity and reduced flights, and driving demand is also lower due to high prices at the pump. Add to that the possibility that the CFTC could do something to limit speculation in the futures markets and you have a real bull/bear debate.

Asian markets were mostly higher overnight, fwiw, while the dollar is lower vs. both the Yen and the Euro. Oil is still hovering above $134 (+6), and the markets are down roughly -1.8%, with every sector in the red. The 10-year yield is down 10 bps to 3.92% as the "R" word surfaces again. And the VIX is seeing a huge spike, +16% to 21.60.