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HIGH RATES MAY NOT BE THE DEATH KNELL FOR STOCKS (1102 ET/1502 GMT)

A inflation continues to slowly ebb in a rising rate environment, stocks may not be subject to sharp declines, according to a recent post by Jeffrey Buchbinder, chief equity strategist at LPL Financial in Boston.

Buchbinder notes that during the 1970s we saw runaway inflation, with CPI reaching a high of 11.7% in February 1978. During that time, the correlation between bond yields was inverted, as higher yields used to combat inflation weighed on stock returns, with the S&P 500 .SPX showing an average annual return of 1.6% between 1970 to 1980 and the yield on the 10-year U.S. Treasury topped 10%.

As inflation began to soften in the first half of the 1980's, the same negative correlation remained but the roles were reversed as equities saw sharp growth, bond yields started to decline and core CPI fell below 4% in May 1983.

From that point until the end of the decade, the S&P 500 appreciated at an average annual rate of 12.15%, according to Buchbinder.

This relationship remained intact during the 1990s as yields continued to fall, inflation normalized and equity markets showed strength.

Buchbinder said, "as we move into a new regime of lower inflation, we should look to concerted changes in stock prices relative to bond yields," because rising yields can do significant damage to stocks while inflation is high.

But when inflation cools and yields move lower stocks can do well. And as inflation currently continues to decelerate, "the high interest rates we’re currently experiencing don’t necessarily spell doom for stocks."

(Chuck Mikolajczak)

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WALL ST POISED FOR LOWER OPEN AFTER HOT JOBS DATA (0845 ET/1245 GMT)

U.S. stock index futures were pointing towards a lower open to close out the trading week, sharply erasing modest gains in the wake of a stronger-than-expected payrolls report as Treasury yields moved higher in anticipation of the Federal Reserve maintaining a tight monetary policy.

Nonfarm payrolls for September came in at 336,000, much stronger than the 170,000 estimate of economists polled by Reuters. The unemployment rate of 3.8% was slightly higher than the 3.7% estimate.

"At least wage gains came in tepid. The rest was hot," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.

"The revisions to back months is shocking, showing the first print is grossly unreliable. If the Fed is data dependent, they’re flying with a broken instrument panel."

Below is your premarket snapshot:

(Chuck Mikolajczak)

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