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More Jobs + Higher Rates = Bring It!

Kevin Cook here to start the week off for Steve...

Two weeks ago when I took this Monday spot for Reity, I asked "Will the bond vigilantes create chaos?" as they drive interest rates higher before the Fed even lifts a finger off the bond-buying button. Friday was proof that the economy and the markets can handle it.

Proof not just because we got a strong June jobs number - plus big positive revisions for April and May - but because the 10-year Treasury yield spiked to 2.73%, a 22 basis point jump! Why isn't this defacto rate hike causing stocks to sell off when the S&P still seemed vulnerable below its 50-day moving average?

Because this is what is supposed to happen when the economy accelerates: more jobs, a steepening yield curve, and forward views of higher revenues and profits for corporate America based on that growth scenario.

You'll hear naysayers talk about Friday as a low-volume affair, or that the jobs data was "abysmal" with big gains in part-time work while we're losing the full-time positions. But the SPDR Regional Banking Index ETF (KRE) closing up 2.8% on double its average volume is all about economic optimism.

It's also why our favorite growth index, the Russell 2000 Small Caps, marked a new all-time closing high at 1,005. Bring the jobs, the growth, and normal interest rates-and take away the QE!

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Kevin Cook

Senior Stock Strategist

Zacks Investment Research

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