Watch Out for Friday's Job Report

Throughout the past week, stock markets dismissed the importance of the non-farm payroll report. When the markets open, the report may not matter much for stocks. Euphoric investors already decided to ignore the Federal Reserve’s cautious approach to cutting interest rates.

Bond markets are also pricing in a 25 bps rate cut. The 6-month Treasury Bill yield fell by 15 bps to 5.30%, for example.

Stock markets want a weak job report to confirm the labor market is showing signs of a slowdown. This increases the chance of the Fed loosening its monetary policy to stimulate growth. Still, strong job growth in June would indicate that the economy can handle interest rates at 5%. However, the retail sector is not convinced.

Dollar General (DG) shares are on a downtrend since peaking in March. Advance Auto Parts (AAP) and Dollar Tree (DLTR) are also lower. Those are among the stocks to avoid. Costco (COST) and Walmart (WMT) are likely to keep trading at new highs. Consumers like their product offerings and continue to shop at those stores. Similarly, clothing brands like Abercrombie & Fitch (ANF) and Gap (GPS) are thriving.

Apparel Retailers like Nike (NKE) and On Holding AG (ONON) may underperform. Consumers might delay buying shoes amid a weakening job market.

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