Only a very strong or truly awful jobs report will drive stocks higher

IN remarks at a central banking conference last Friday, Fed chairwoman Janet Yellen made the case for a rate hike, citing improved economic data in the US. This was a change in tone from recent appearances when Ms Yellen acknowledged worries that weakening global growth could spread to the US, transmitted by a Brexit-related financial crisis or otherwise. Stocks initially bounced in the wake of Ms Yellen's comments, partly because, according to analysts at brokerage Bank of America Merrill Lynch, she made no explicit reference to the possibility of a September hike, despite her "hawkish" tone. But rate-sensitive sectors came tumbling down after vice-chairman Stanley Fischer bluntly told CNBC television that one or even two rate hikes were possible by the end of the year.

The most rate-sensitive sector was the most beaten down. Utilities are in direct competition with Treasury bonds for the dollars of fixed-income investors. Unable to live off the interest generated by Treasuries, retirees have migrated en masse from bond markets into utility shares. That trend sparked interest in utilities from hedge funds and day traders, a strange phenomenon that has caused regulated electricity producers in rural areas to often see bigger daily gains in their shares than fast-growing Silicon Valley issues in recent months. Now, with the caprice of teenage music fans, or migratory hunters, traders have dropped the utility sector and started buying into the sectors that do better with higher rates, such as financials.

This week, rate-sensitive stocks will likely be the biggest movers again, responding to a high-stakes jobs report.