Stocks closed lower on Friday, but the big three indexes (Dow, S&P 500 and Nasdaq) finished higher for the week. Although, the small-cap Russell 2000, and the mid-cap S&P 400 were down for the week.

Friday's Employment Situation Report came in better than expected with 272,000 new jobs being created in May (229K in the private sector and 43K in the public sector) vs. the consensus for 182,000 (168K private and 14K public). The unemployment rate, however, unexpectedly ticked up to 4.0% vs. last month's 3.9% and views for the same. Additionally, the participation rate fell to 62.5% vs. last month's 62.7% and estimates for 62.7% as well. And average hourly earnings rose more than expected with a gain of 0.4% m/m vs. last month's 0.2% pace and estimates for 0.3%, while the y/y rate increased to 4.1% vs. last month's 3.9% and views for 3.9%.

Stocks immediately fell in pre-market trading. And they opened lower in the regular session. But by late morning/early afternoon, the big three indexes were all in the green. Yet the Russell 2000 and S&P 400, while bouncing off their intraday lows, never got into positive territory. And by day's end, the big three indexes were in the red also.

The revisions to March and April's jobs numbers were modest with March being lowered by -5,000 to 310K, and April being lowered by -10,000 to 165K.

For May, the biggest jobs gains came from the following sectors: Health Care added 68,000 new jobs; Government employment rose by 43,000; Leisure & Hospitality gained 42,000; Professional, Scientific and Technical Services increased by 32,000; Social Assistance jobs were up 15,000; and Retail Trade picked up 13,000 new jobs.

It was an interesting report to say the least with virtually every number coming in outside of expectations. The market didn't seem to know how to act as evidenced by the back-and-forth price action. Do traders focus on the strength of the jobs tally, or do they focus on the weakness of the respective rates (rising unemployment rate and falling participation rate)? Or does one focus on the rising wages which will serve as an aggravator to inflation?

The market won't have much time to contemplate last week's jobs data as the focus will soon shift to the Fed and this week's inflation data.

On Wednesday morning, 6/12, we'll get the next Consumer Price Index (CPI) inflation report. The last CPI report (retail inflation) showed the core rate (ex-food & energy) at 3.6% y/y vs. the previous month's 3.8%.

Then later in the afternoon, the Fed will conclude their 2-day FOMC meeting with their announcement on interest rates, followed by the customary Fed Chair Press Conference shortly thereafter. Nobody is expecting the Fed to cut rates this week. Or at their July meeting either. But there's good odds on a cut in September.

On Thursday, 6/13, we'll get the Producer Price Index (PPI) inflation report. The last PPI report (wholesale inflation) came in at 2.4% y/y, which was in line with the previous month's 2.4% pace.

In each of these reports, we'll see if disinflation has resumed, if it stalled, or worse, if it's creeping back up.

In the meantime, the S&P 500 and Nasdaq both made new all-time highs last week. And they are both within striking distance of breaking out to new all-time highs.

A little bit of good news could be all it takes.

See you tomorrow,