Friday’s employment report has created an even hazier backdrop for stocks. Recent economic data showed an economy starting to cool, but with 244,000 jobs created in April — the best showing in 11 months — this expansion still may have legs after all. The key distinction: the economy‘s areas of support are not what you would have expected a few months ago.

In recent weeks and months, investors have been trying to assess stocks in the context of a sharp spike in commodities — from oil to silver to wheat. Only recently, we’ve seen how the massive flooding in the Midwest is leading to forecasts of sharply falling farm output and eventually, higher food prices. Consumers didn’t need to hear that while gasoline prices were eating a hole in their pocketbooks.

#-ad_banner-#Despite that, stocks were able to rally through much of April, thanks to a declining dollar that was boosting prospects for U.S. blue chips. In effect, the domestic economic picture looked troubling, while the rest of the world promised to provide at least a decent tailwind.

That scenario now looks backward, as former global growth pillars are starting to wobble. Efforts to slow the Chinese economy may be taking effect, as a range of data points in that all-important economy imply that growth in 2011 may move down to the mid single-digits from a seemingly never-ending run of nearly double-digit GDP growth. Brazil is trying to curb inflation, efforts of which have not always yielded soft landings. And in just a few trading sessions, high-flying commodities such as silver and oil have sharply pulled back while the dollar has begun to rebound. Many are suddenly shifting their sights back to the United States as an engine of growth. Friday’s jobs report simply underscores that notion.

GM’s (NYSE: GM) first-quarter results help tell the story. The automaker earned $908 million from its foreign operations a year ago. That figure dropped to $480 million in the recent first quarter. The company’s chief financial officer, Daniel Ammann, told investors that GM’s growth rate in China “is at 10% to 15%, down from the 40% to 50% we’ve been seeing.” Profits also fell sharply in South America from a year ago and Europe remains unprofitable. Here in the United States, GM is doing quite well: Earnings (before interest and taxes) at the North American division were about $1.3 billion, $100 million higher than a year ago. Merrill Lynch thinks North American earnings before interest and taxes will average around $2 billion for each of the next three quarters.

What it means
For investors, the question is whether today’s jobs report (and the subsequent rally after four straight down sessions) means it’s time to keep fully-exposed to the market. The answer is a qualified yes (I never like to be fully exposed, as it’s nice to have cash set aside for major pullbacks that create value). Yet even as it pays to stay invested, the investing themes are now changing.

These changes include the following:

1. Airline stocks could really move into favor if oil keeps pulling back and U.S. job creation remains respectable. Oil has quickly moved from $114 last week to just under $100 late this week. It’s no coincidence that the Amex Airline Index (AMEX: XAL) has surged 10% since April 19. [My colleague Ryan Fuhrmann profiled airlines a month ago.] 

2. In a similar vein, the automakers such as GM and Ford (NYSE: F) have been penalized for the fear that $4 gasoline will hurt truck sales. If gasoline falls back to $3.50 in coming weeks, then these stocks could get a relief rally. The same logic applies to auto-parts makers. American Axle (NYSE: AXL), for example, trades for just six times projected 2012 profits after a recent slide. Shares of RV maker Winnebago (NYSE: WGO) took a big hit from rising oil prices. Might the converse also be true?

3. You can’t ignore retail. Consumer spending remains subpar, but if the private sector can create a million more jobs between now and year’s end, then spending is bound to get a boost. Big retailers don’t appear especially cheap, so I’m focused on the names that have had poor execution up until now such as Best Buy (NYSE: BBY), and Aeropostale (NYSE: ARO), along with small caps Casual Male (Nasdaq: CMRG) and CitiTrends (Nasdaq: CTRN).
 
On the downside of the ledger:

4. Commodity plays may have further to fall until they are bargains — especially if concerns build that the Chinese economy is slowing. For example, I suggested in mid-April that shares of silver miner Couer D’Alene Mines Corp. (NYSE: CDE) were due for a pullback. Shares have dropped 20% since then and will soon enough represent a bargain. But we’re not there yet.

5. You also need to avoid the temptation to try to spot bargains in Japan. The country’s blue chip exporters are dealing with the effects of the continued plant shutdowns as well as a super-strong yen that is making companies’ exports less competitive. I hate to be alarmist, but Japan may be headed for a deep financial crisis if its economy doesn’t generate the growth required to tackle its massive government debt.

Any such crisis in Japan, which holds a good chunk of the United States’ debt, could create indigestion for U.S. stocks.

6. A dimming outlook for Europe and Asia could also create headwinds for high-tech companies, many of which derive a substantial amount of profits from foreign markets. As this chart shows, the iShares DJ Technology Index (NYSE: IYW) has benefited from expectations that global economic growth will take off in the periods ahead.

 
It’s not time to be bearish on tech stocks, but many of the biggest tech firms such as Oracle (Nasdaq: ORCL) will be hard-pressed to generate double-digit profit growth in coming years — unless they pull off major acquisitions or buy back a lot of stock. You want to see this sector newly-cheapened before jumping in again.

Action to Take –> A little-noted item in the jobs report bears watching. The headline figure showed that 244,000 jobs were created, which is even more impressive when you consider that government payrolls continue to shrink. Job creation in private sector was really robust: 268,000 private sector jobs were created in April — the best monthly showing in more than five years. That figure may cool in coming months, but as long as private-sector job creation stays above the 200,000 monthly mark, then the economic upturn will become self-reinforcing. Dropping food and gas prices could help really brighten the outlook for the U.S. consumer in coming quarters. And if you keep the six points I mentioned above in mind, you should be well-positioned to avoid pitfalls and profit accordingly.