U.S. equities moved higher on Friday thanks to a solid June jobs report that basically maintains the status quo on the economic front: Payroll gains were solid, the unemployment rate drift slightly higher and wage growth remains tepid. Overall, the bulls were encouraged by the “Goldilocks” combination of hiring without inflation that could keep the Federal Reserve from being more aggressive with its policy tightening pace.

In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 added 0.6%, the Nasdaq Composite gained 1% and the Russell 2000 finished up 1.1%. Meanwhile, Treasury bonds were weaker, the dollar ended higher, gold lost 1.1% and oil fell 2.8% as recent gains are reversed. The crude oil weakness bolstered the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers.

Breadth was positive, with 2.3 advancers for every declining issue on the NYSE on light volume, at 74% of the 30-day average. Technology stocks led the way thanks to a bounce in the big-cap “FAANGs” with the group up 1.3%. Telecoms were the laggards on the backup in yields, falling 0.4%.

Facebook Inc (NASDAQ:FB) gained 1.8%, Amazon.com, Inc. (NASDAQ:AMZN) rose 1.4%, and Apple Inc. (NASDAQ:AAPL) gained 1%. Tesla Inc (NASDAQ:TSLA) gained 1.4% but remains down some 18% from its recent high. Reuters reported TSLA registrations fell 24% in April in the key California market, a sign of waning Model S/X demand as Goldman Sachs analysts warned of earlier this week.

On the economic front, nonfarm payrolls increased 222,000 in June beating expectations for a 178,000 gain. The unemployment rate increased 0.1% to 4.4%, rising from a 16-year low on a rise in the labor participation rate. Average hourly earnings increased at a 2.5% annual rate (versus the 2.6% rate expected).

Conclusion

The big story this week as been the combination of weakness in both equities and Treasury bonds as Federal Reserve hawkishness seen earlier this month has finally spooked bond traders into selling. As a reminder, Fed policymakers have been frustrated by a lack of a market response to their efforts to raise interest rates and their warning that a roll off their $4.4 trillion balance sheet is coming later this year.

In fact, financial conditions have loosened since the Fed started its policy tightening campaign in December 2015. In part because stock prices have marched relentlessly higher. And in part because the bond prices have rallied as well, pushing long-term yields lower.

What’s changed? The bond market seems to be sniffing out a looming increase in inflationary pressure. The cause could be everything from labor market tightness to chatter of possible import price tariffs (on steel in particular) from the Trump Administration.

This, in turn, is spooking so-called “risk parity” trading strategies since both stocks and bonds are weakening in unison; a violation of what investing textbooks tell us. Normally, stock and bond prices move in opposite directions.

The loss of this diversification benefit has increased volatility on Wall Street, pushing up the CBOE Volatility Index’s 20-day moving average above its 50-day moving average for the first time since March — something that marked the start of a three-month timeout on the post-election “Trumpflation” rally.

Something else to keep in mind: Sentiment is extremely high, breadth extremely weak, and seasonality poor. All this, combined with the start of the Q2 earnings season next week (with big banks on the docket) suggests the tight trading range stocks have been mired in over the past month could be resolved with a sharp move to the downside.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.