ECONOMICALLY-SENSITIVE STOCKS HAVE BEEN OUTPERFORMING TECHNOLOGY -- STOCKS RALLY TODAY ON WEAK JOBS REPORT -- NASDAQ 100 BOUNCES OFF CHART SUPPORT -- BOND YIELDS RECOVER FROM MORNING DECLINE

TECHNOLOGY HAS BEEN A MARKET LAGGARD... With the economy showing signs of strength, money has been rotating into more economically-sensitive sectors at the expense of technology stocks.   The table in Chart 1 shows materials, energy, and financials being the three strongest sectors over the last month, while technology has been the weakest.    That explains why the tech-dominated Nasdaq market has been lagging behind the Dow and S&P 500.   And explains why the chart of the Nasdaq market may hold important clues to stock market direction.

NASDAQ BOUNCES OFF CHART SUPPORT...Tuesday's message showed selling in the Nasdaq Composite Index testing two important levels of support.  One was its 50-day moving average; and the other being potential support along its March high.   Today's chart shows Invesco QQQ Trust bouncing off both support levels which is an encouraging sign for it and rest of the market.  While that's happening, the Dow and S&P 500 are hitting record highs.    Today's rally in stocks is coming despite a big miss in April's employment report.

WEAK JOBS REPORT...The April jobs report released this morning showed only 266,000 new jobs created which was well below expectations for a million jobs.  And the unemployment number increased to 6.1%.      Stocks, however, have rallied on the disappointing report.  The thinking appears to be that the weaker employment numbers reduced pressure on the Fed to hike interest rates anytime soon and to postpone any move to cut back on bond purchases which could push bond yields sharply higher.  That latter point may also explains today's buying of technology shares.   Bond yields initially fell on the jobs report, but have since rebounded.  Chart 3 shows the 10-Year Treasury yield recovering from this morning's sharp drop.