May jobs data: How markets are reacting

Yahoo Finance Live's Jared Blikre breaks down the market reaction to the stronger than expected May employment report.

Video transcript

BRAD SMITH: Welcome back. We're about 20 minutes into the start of the trading session here in the US. Dow, S&P 500, NASDAQ, all in positive territory. Let's get over to Yahoo Finance's Jared Blikre as we've been monitoring the reaction on a hotter than expected jobs report this morning now, Jared.

JARED BLIKRE: Yes. Check this out. The markets are running with the information to the upside. Dow up over 1%. And guess what? The NASDAQ is underperforming the Dow and the S&P 500 today. It's up about 1/2%. That is a flip from the normal price action. And I want to show you a longer term chart on the S&P 500. This is going back three months.

But you can see we clearly broke out of the recent trading range. And if I go back a year, you can see we are heading towards those August highs. And if we take a look at the NASDAQ, it's already soared above those. And let's see if we can get that right there. Well, there you go. Actually, just about equaling those. So interesting to see that going on.

Want to show you what's happening in volatility with the VIX. And let me dial this down to a three-month. You can see we are heading to new lows. Haven't seen these levels for a long time. On a three-year basis, you can see heading back into that range we saw during that very quiet period, well, quiet relative for the time when we did see a lot more bullish tailwinds in the market.

Finally, here is the B of A MOVE index. I've been tracking bond volatility. It has been ticking down now two days. These are as of yesterday's close, so we'll get another print today, but that is heading in the right direction. We want to show you what's going on in sector action today. Materials and energy, those are the two big leaders there. Consumer discretionary also up nicely.

But with respect to materials and energy, one of the things that stood out in this report this morning, strength in construction. And that's kind of the canary in the coal mine. But it is running really strong right now. Maybe that's why we're seeing the Dow outperforming a little bit today. We got JPM, that's JP Morgan up 2%, Nike up 3%.

I do want to hit China. So we a segue to this real quick. We are seeing a big rebound in a lot of these shares. We know that they have been depressed recently. The Chinese government bending over backwards to try and support the property sector right now. But that big reopening that we saw earlier in the year really hasn't materialized just yet. So they're feeding that and trying to stabilize the situation.

At what point do they really consider devaluing the yuan because that has been heading in the direction of a weakening Chinese currency here. If I can just show. This is the last thing I want to show, I promise. There we go. Let me just put this on a line chart. So the direction up here, that means the US dollar is strengthening, the yuan is weakening.

In the past, this is one of the escape valves, one of the release valves for the Chinese government. And if we do surpass these levels from 2018, 2019, I think that would be a huge deal. Because look, the trend is toward more volatility, at least on a technical analysis basis for the yuan, so we'll have to see how that evolves, guys.

- Jared, thanks a lot. Interesting stuff.