What to watch: Where do stocks go from here?

Not only did the economy create a better-than-expected 217,000 jobs in May, but the new hires also mean the nation has exceeded its previous employment peak in 2008. U.S. employment rose to 138.46 million last month, erasing all the losses from the financial crisis and topping its prior January 2008 record of 138.37 million jobs, according to Bespoke Investment Group.

So how have stocks fared in the past after the number of jobs in the nation hit a new peak? In short, gains usually follow, but the size of the returns tend to be a tad below the historical stock market averages, an analysis by Bespoke found.

Since 1945, there have been 12 times when U.S. non-farm payrolls went a year or longer without hitting a new high. In the six months before the job market making a new record, the S&P 500 stock index has posted average gains of 5.6%, Bespoke data show. This time the gains have been even stronger, with the index gaining 6.5%.

But performance in the one-, three- and six-month periods after a new job high has resulted in positive but below-average returns.

Stocks tend to post above-average returns in the six months before a new employment peak. And with jobs reaching new highs, the prospect for tighter Federal Reserve policy also rises, which makes investors cautious.

The good news: The Fed has "done all but guarantee that they won't be tightening rates anytime soon," Bespoke says.