Stocks closed lower on Friday, but up for the week, making it 2 weeks in a row for the S&P (and 4 out of the last 5 weeks), and 5 weeks in a row for the Nasdaq (5 out of 5 for them).

Friday's better than expected Employment Situation report weighed on stocks.

Instead of the 185,000 new jobs (170K in the private sector and 15K in the public), the market was expecting, we got 517,000 new jobs (443K in the private sector and 74K in the public). The unemployment rate improved as well, ticking down from 3.5% to 3.4% (lowest since 1969) vs. the consensus for 3.6%. The participation rate improved from 62.3% to 62.4%. While wages moderated with a 0.3% m/m increase vs. last month's upwardly revised pace of 0.4%, and a 4.4% y/y increase vs. last month's upwardly revised 4.9%.

While some of those 'new' jobs (35,000) were simply employees who were previously on strike returning to work, that still puts the number of jobs gained in January at more than 2.6 x that of the consensus.

Additionally, November and December's jobs numbers were upwardly revised with an extra 34,000 added to November's totals (from 256,000 to 290,000), and an extra 37,000 added to December's (from 223,000 to 260,000).

The biggest job gains came from the following industries: Leisure and Hospitality up 128K, Professional and Business Services up 82K, Government employment up 74K (which includes the 35K university workers that came off strike), Health Care up 58K, Retail Trade up 30K, Construction up 25K, Transportation and Warehousing up 23K, Social Assistance jobs up 21K, and Manufacturing up 19K.

The market supposedly dropped on the news of the stronger than expected employment report because it suggested the Fed may not be able to take their foot off the interest rate pedal sooner than expected.

Although, Friday's pullback could very well have been nothing more than profit taking after two weeks of sharp gains.

In other news, the Services Index came in at 55.2, well above last month's 49.2 and views for 50.4.

With the next Fed meeting not until March 21-22, and the employment report behind us, the focus will go back to earnings.

We'll get 760 companies set to report this week. And another 763 next week.

In the meantime, stocks have been surging higher as inflation has been easing, and the prospects of a recession may be fading.

Still too early to tell as the Fed's rate hikes do have a lagged effect. But so far, the market sees the worst as being behind it. And stocks are climbing as a result.

See you tomorrow,